This is the lowest in records going back to 1990-91. The ratio touched a low of 1.13 in FY23, a record low at the time; and has fallen in the two subsequent years to fresh lows. Debt of unlisted companies is nearly at parity with equity, according to the latest available data for such firms.
The CMIE sample includes 15,918 of the largest unlisted non-finance-sector companies with available data. The debt-to-equity ratio is a measure of indebtedness, where lower ratios indicate less leverage. The interest-coverage ratio looks at earnings relative to the amount of interest to be paid. Ratios below one indicate that earnings are insufficient to meet interest payments. The interest-coverage ratio for unlisted Indian companies has also touched a 35-year high of 2.78 in FY25. This is now higher than the previous peak of 2.69, which was achieved at the height of the pre-global-financial-crisis-boom in FY07.
Unlisted companies, which show rising interest coverage include Amazon Web Services (96.7 in FY25 compared to 45.7 in FY24), Fiat India (116 in FY25 compared to 38.8 in FY24) and Toyota Kirloskar (156.2 in FY25 compared to 94 in FY24).
Emails sent to these companies did not receive a reply.
Listed companies have also seen similar deleveraging in the post-pandemic period.
The debt-to-equity ratio for listed companies was 0.5 in FY25-- also a record low. Their interest-coverage ratio was 5.01-- the lowest since FY08, when it was 6.24. The ratios are for a sample of 4,129 listed non-finance companies.
Companies typically increase borrowings when they are looking to invest in new factories or create additional capacity in some form, noted Dwijendra Srivastava, chief investment officer (debt) at Sundaram Asset Management Company. The current demand situation does not necessarily demand such expansion, which may be the reason that companies continue to deleverage, according to Srivastava.
“Manufacturing companies are doing only incremental capex,” he said, adding that this is also often funded with the money generated from the business rather than borrowed funds.
Organic and inorganic capacity addition--both of which can contribute to increased borrowings--has been affected by limited demand, he added. Inorganic capacity addition is when a company buys another company’s assets instead of building its own.
“Historically, if you are at the end of the interest-rate cycle, a lot of premium companies would be mobilising funds at this rate to bring down their incremental cost of borrowing,” said Mahendra Kumar Jajoo, chief investment officer (fixed income) at Mirae Asset Investment Managers.
Large metal and cement companies are among those which have recently raised money from the debt market after being away for years. The debt is likely being used to replace existing debt from banks which may be costlier, according to Jajoo.
The money raised tends to be short-term and may not add to the overall leverage since it substitutes one form of debt for another. But, debt issuances are expected to rise in line with the growth in the economy, according to Jajoo.
Sectoral data shows that incremental borrowings for unlisted manufacturing companies have been the highest. Electricity has seen de-growth. Construction and real estate companies have also taken on lower growth in their absolute borrowing levels in FY25 relative to their listed counterparts.
 "Unlisted firms, Unlisted companies")