With gross debt of the BSE 500 rising more than 10 times since FY02—to R24.3 lakh crore in FY14 —India Inc’s leverage has risen rapidly. As a result of which, the interest cover—ratio of operating profits to interest expenses—has gone down considerably and over a fifth of firms will not have enough earnings to even pay interest over the year. What is worse, analysis by Standard Chartered shows, in the post-financial crisis period, the increase in debt levels did not lead to a corresponding hike in asset creation — so, servicing debt is going to be an increased problem. India Inc, the study points out, needs to raise $80-90 billion in FY16-18 to restore the consolidated debt-to-equity ratio to 1.2 from the 1.34 currently, and that’s assuming a healthier growth in net profits than being seen currently.
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