India Inc.’s interest-paying capability shows signs of improvement, but the companies may not be out of the woods yet.
ICR is a crucial yardstick that measures whether a company’s available earnings are adequate to pay interest charges on its outstanding debt. To calculate, a firm’s earnings before interest and tax or EBIT is divided by the interest charges for the same period. And the higher the ratio, the better the company’s safety margin. When a firm’s ICR deteriorates to 1.5 or lower, its ability to pay interests becomes doubtful. In the sample here, around 349 companies have an EBIT greater than their interest payments.
According to Kavita Chacko, Senior Economist at CARE Ratings, “With companies going slow on fresh borrowings and improvements in earnings, there has been an improvement in their debt-servicing ability. But their performance in the coming period, which is contingent on the underlying demand conditions in the economy, will determine whether it is a sustainable turnaround.” EBIT for the sample companies registered a double-digit growth of around 14 per cent in 2016/17 compared to 5.6 per cent in the previous financial year.
This story is from the December 17, 2017 edition of Business Today.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the December 17, 2017 edition of Business Today.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
TRUMP'S TRADE TANGO
The return of Donald Trump as the 47th President of the US has put the global economy on edge. India, too, is unlikely to remain unaffected. How will policymakers meet this latest challenge?
"The essence of the Trump administration will be transactional”
Global investor, analyst, and best-selling author Ruchir Sharma decodes why Donald Trump won the elections, what India should do, the risks, and more
MEDIA Juggernaut
THE JOINT VENTURE BETWEEN RELIANCE INDUSTRIES AND DISNEY CREATES AN ENTITY THAT OWNS MORE THAN 100 TV CHANNELS AND WILL HOLD A MONOPOLY ON CRICKET BROADCASTS, POSITIONING IT TO NEGOTIATE AGGRESSIVELY WITH ADVERTISERS
'Gap between haves and havenots is narrowing"
Tanvee Gupta Jain, Chief India Economist of UBS Securities India, on India's consumption story and the risks to the Indian economy
Rural Hope, Urban Fears
Industry enthused by signs of a revival in rural demand, but fresh concerns emerge over urban consumption
CRASH LANDING
The Supreme Court's order to liquidate Jet Airways, after prolonged insolvency proceedings, brings the focus back on the actual effectiveness of IBC
Indictment and its Aftermath
US prosecutors' decision to press charges against Gautam Adani and others in a case of alleged bribery could hit the group's ambitious expansion plans
"Moving to cloud helped us grow❞
What was the problem you were grappling with?
She's Got Time
MORE WOMEN ARE BECOMING WATCH CONNOISSEURS, SEEKING OUT BOTH JEWELLED AND TECHNICAL WATCHES FOR THEIR STYLE AND CRAFTSMANSHIP
RISING STAR
PARUL GULATI IS a name that's been steadily gaining prominence in the Indian entertainment industry after she appeared on season 2 of Shark Tank in 2023. She has become a multifaceted personality who effortlessly transitions between acting and entrepreneurship.