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Slowdown, yes—but financially, India Inc. is in the pink of health

A Moneycontrol analysis of September quarter earnings shows that the interest-coverage ratio (ICR) for large, mid-sized, and smaller firms declined only slightly compared to the June quarter but remained in a safe range of 4-5.

November 14, 2024 / 10:05 IST
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ICR is interest expense as a percentage of operating exclusive depreciation which is a non-cash expense. It is a measure to guage the ability of a company to service debt.

Despite slower profit and revenue growth and elevated interest rates, listed companies have been able to maintain their ability to service debt more than comfortably, unlike in the previous economic cycle when high leverage started to take a toll on companies when the downturn hit.

A Moneycontrol analysis of the September quarter earnings shows that the interest-coverage ratio (ICR) for large, mid-sized, and smaller firms declined only slightly compared to the June quarter but remained in a safe range of 4-5. ICR is interest expense as a percentage of operating profit exclusive of depreciation which is a non-cash expense.  It is a measure to guage the ability of a company to service debt.

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Specifically, the ICR for 87 BSE Midcap companies and 543 BSE Smallcap companies fell to 4.37 and 4.32, respectively, down from 4.96 and 4.53 in the June quarter, according to ACE Equities. In contrast, the ICR for 344 firms of BSE 500 companies decreased to 6.48 from 7.12. The analysis excludes banks, financials, insurance, and oil and gas companies.