Top 500 cos over-leveraged, recovery still away: Ind-Ra

Although credit metrics of the largest listed corporates have shown signs of improvement, a full recovery is still some time away, says a report. "The credit metrics of the largest listed 500 corporate borrowers are showing signs of bottoming out, but any claims of a recovery in the system-wide credit profile may be early," India Ratings said in a study today. The rating agency took top 500 listed corporates, excluding banking and financial services, with highest balance sheet debt as of 2013-14 for its study.

These corporates account for total balance sheet debt of Rs 31.99 trillion in 2014-15. Around 69 percent of the debt was from five sectors - power, metals & mining, oil & gas, infrastructure & construction and telecom. The agency said in 2014-15, these top corporates' leverage (median) was estimated at 4.33 times compared to 4.65 times in 2013-14.

"This is the first time since FY10 that the median leverage has fallen on a year-on-year basis," the agency's Senior Director (Corporate Ratings) Deep N Mukherjee said. In 2014-15, the aggregate absolute revenue and EBITDA of these corporates grew at a paltry one per cent and six per cent, respectively. "This is the weakest revenue growth since the global financial crisis in FY09.

This may be attributed to the disinflation in the economy," Mukherjee said. "To the extent company financials are nominal (not adjusted for inflation) a dis-inflationary environment may have a temporary damping effect on revenue and earnings growth," the rating agency said. The margin stabilisation of corporates is not uniform and thus continues to remain worrisome.