Debt rising but profit diving for many large firms

Credit Suisse tracks some large companies that are also highly indebted. 

The brokerage calls these companies ‘House of Debt’. According to the agency, the debt to Ebitda (earnings before interest, tax, depreciation and amortisation) ratio for many of these companies is more than 10 times, but profitability in most of these has sharply deteriorated. This shows these firms will struggle to service their debt to banks. Many of these firms have already caused bad debts in banks. 

The RBI’s insolvency proceedings could be directed against some of these highly indebted companies. “Even in the larger stress loans, the companies need a 30-80% reduction in interest burden to get to an interest cover of 1X, at current profitability,” the brokerage said in its report. Videocon, Electrosteel Steels and Bhushan Steel are some of the firms on its list.