Crisis Zone

The 15 most-indebted non-BFSI companies had a combined debt of ₹10 lakh crore in FY20, a 15 per cent increase over the previous year, and their troubles seem to be far from over

- NEVIN JOHN

Albert Einstein once said, “We cannot solve our problems with the same thinking we used when we created them.” Businesses in their aggression to grow wealth or in their failure to understand the storm that chases them, usually end up leveraging the entity. In recent times, companies that leveraged beyond their repayment ability had to undergo insolvency proceedings and some billionaire promoters returned home with empty pockets.

The BT500 rankings shows that despite past lessons, corporate debt is still on the rise. The total debt of India Inc.’s 15 most-indebted non-BFSI companies (excluding Reliance Industries, which turned net debt free in the September quarter using investments received in digital and retail businesses) increased by 15 per cent to ₹10 lakh crore in 2019/20, from ₹ 877,441 crore in 2018/19. Interest outgo jumped 28.8 per cent to ₹74,065 crore from ₹57,506 crore. However, there is improvement in companies’ cash and bank balance, which increased by 32.4 per cent to ₹41,841 crore from ₹31,603 crore.

Half of the 15 most-indebted companies are state-owned enterprises. This includes the likes of Bharat Petroleum and Hindustan Petroleum, which the government is looking to privatise. These companies cover a wide spectrum of industries — there are four steel companies, three each from power and oil sectors, two each from telecom and infrastructure, and one carmaker. Four of the 15 companies have a negative interest coverage ratio (ICR) as opposed to just one last year. ICR measures the number of times a company can cover its interest payment with available earnings..

Towering Troubles