A Major Obstacle

One of the numbers any analyst of corporate balance sheets follows closely is the return on capital employed (ROCE, or profit before interest as a percentage of shareholders' funds plus debt). In the case of the better Indian companies this is rarely above 17-18 per cent. If interest rates are higher than this, as they currently are, this is clearly a pointer to potential non-performing assets. Mind you, 17-18 per cent ROCE is for the better companies