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Top listed firms report an improvement in their debt servicing ability

The ICR for 1,056 firms (ex-financials, energy & IT services) improved to 4.4 during the April-December 2017 period

Krishna Kant 

RBI likely to maintain status quo on rates for entire 2018, say experts

There is some good for banks struggling with higher non-performing loans in the corporate sector, as top listed firms reported an improvement in their as defined by the interest coverage ratio (ICR) during nine months of FY18.

However, this was true only of firms with lower or light assets. Debt-laden ones reported a further decline in their during 9M FY18.

The for 1,056 firms (ex-financials, energy & IT services) improved to 4.4 during the April-December 2017 period.

Analysts attribute this to an improvement in corporate profitability in the past three years, coupled with a brake on incremental borrowing by corporate houses.

The is calculated by dividing a company’s operating profit (or Ebitda) in a period by its interest payment or liability during the corresponding period.

Companies’ combined operating profit was up 4.2 per cent year-on-year (y-o-y) during 9M FY17.

A deeper reading of CARE Rating’s analysis of 2,314 companies, excluding banks and financials, suggests that the improvement in has been largely due to asset-light and lightly-indebted companies.

Top listed firms report an improvement in their debt servicing ability
An improvement in corporate profitability may do little to help banks tackle the bad loan menace if their biggest customers continue to face financial headwind.

Economists at CARE Ratings raised concerns over this. “The changing is a good indicator of the vulnerability of

highly-indebted firms. The numbers suggest that the companies with higher level of outstanding witnessed a sharper decline in in 9M FY18 relative to FY17. This is definitely a concern,” said a CARE Ratings economist team led by

Top listed firms report an improvement in their debt servicing ability

First Published: Tue, April 10 2018. 22:26 IST
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