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Last Updated : Nov 29, 2018 02:13 PM IST | Source: Moneycontrol.com

Companies on BSE 500 with high debt default probability rise 220% in 2018: Report

At present, the number of companies that crossed a debt-default probability threshold stands at 77 compared to 24 at the beginning of 2018

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The number of companies listed on the BSE 500 that have a debt-default probability above 0.52 percent jumped 220 percent in 2018, The Economic Times reports.

At present, the number of companies that crossed a debt-default probability threshold stands at 77 compared to 24 at the beginning of 2018, Bloomberg data shows.

The wire computed the data using its proprietary risk model based on parameters such as share price, market capitalisation, share price volatility, short-term debt, long-term debt, interest expense and adjusted cash flow from operations.

These companies include: Vodafone Idea, Dewan HousingBombay Dyeing, Srei InfrastructureJet Airways, Indiabulls Real Estate, Indiabulls Housing Finance and Reliance Capital.

The default probability of these companies has shot up in the past six months, whereas their stocks have dropped. The latter has fallen 49 percent on an average this year compared to a 5 percent drop in the BSE 500 index, the report said. The 77 companies account for 4.5 percent of the total market capitalisation at Rs 6.75 lakh crore.


The sample includes 37 companies with a market capitalisation of over Rs 5,000 crore and 30 of the sample companies belong to the banking and finance sector.

According to the report, investors across the globe refrain from putting money in companies with a 0.52 percent chance of defaulting on debt in the next 12 months.

Read: IL&FS Transportation Networks to divest stake in some road projects to ease liquidity crunch


The market has been on the edge ever since Infrastructure Leasing & Financial Services (IL&FS) defaulted on a series of payments in September. The default hit investor sentiment towards non-banking finance companies (NBFCs), with the government forming a new board for IL&FS under the leadership of Uday Kotak to deal with the liquidity crisis.

Meanwhile, the government has been also pushing the Reserve Bank of India to ensure adequate liquidity for NBFCs.

Read: RBI to pump in additional liquidity of Rs 40,000 cr in December

However, the companies' ability to repay debt has improved in FY18 as total debt of companies, excluding financial companies, with a high default risk probability dropped to Rs 6.65 lakh crore from Rs 7.1 lakh crore in FY16. Overall, their interest coverage ratio improved to 1.87 from 1.43 in the same period, the report stated.

First Published on Nov 29, 2018 02:13 pm
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