Borrowing costs bite: Interest-rate surge hurts corporate profits

Interest expenses of listed firms (ex-BFSI) were up 18.5% YoY in Q2FY23

Following the contribution of loans to the corporate bottom line for nearly two years after the outbreak of the pandemic, interest costs on those have begun to weigh on companies’ earnings.

The combined interest expenses of listed companies (ex-BFSI) were up 18.5 per cent year-on-year (YoY) in Q2FY23 as against an 8.8 per cent YoY decline in their combined operating profits during the period.

This is the fastest growth in the companies’ interest expenses in at least three years.

As a result, their interest coverage ratio (ICR) declined sharply to 7.2X in Q2FY23 from 9X in Q1FY23 and a high