Rs 8.6 lakh cr at risk: India's most heavily-indebted companies are still struggling to service loans

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26 Aug, 2025 12:21

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Nearly 150 top borrowers with debt worth Rs 8.59 lakh crore owed across the Indian banking system are struggling to pay interest on their loans.

The financial statements of highest debt-ridden corporate borrowers including Jaiprakash Associates (Rs 67,978 crore), Videocon Industries (Rs 47,554 crore), Lanco Infratech (Rs 44,365 crore), Bhushan Steel (Rs 43,440 crore) and GVK Power & Infrastructure (Rs 26,864 crore) show weak  debt servicing ability - interest to EBITDA (earnings before interest, tax, depreciation and amortization) ratio of above 1 or in negative.

EBIDTA of a company is typically seen as a proxy to company’s cash flow generating capacity and it signifies the company’s ability to meet its debt service obligation.

A negative ratio indicates that the company is incurring operating loss and servicing interest in this condition is a tall order.

A negative ratio was largely seen in the infrastructure and steel sectors including large companies such as Monnet Ispat & Energy (-13.7 percent), Ballarpur Industries and MTNL (-2.7 percent each) and Alok Industries (-2.4 percent).

The above-mentioned companies also have a high debt to equity ratio that raises a red flag: showing high level of debts as against the core capital. Most of these entities not only have a very high debt to equity ratio, but also have negative networth on account of prolonged period of stress in earnings.

Alok Industries (-76), Lanco Infratech (-60.3), IL&FS Engineering and Construction Company (-17.5), Jindal Stainless (-17.8) and Punj Lloyd (-6) portray a weak balance sheet with high level of debt outweighing the assets churned out by the company for the shareholders.

Most of the above-mentioned companies have been in the debt-trap and not servicing repayments to their respective lenders.

This also suggests that any further resolution might require banks to take haircuts of 75 percent or more for the companies to become healthy again.

Project costs from the time loans were borrowed a few years ago to now have increased 1.5-2 times, according to a senior State Bank of India (SBI) executive.

The finance ministry has already pegged the stressed loans at Rs 9.6 lakh crore, including loan amounts in the restructured and special mentioned accounts category.

Last week, the central government amended the Banking Regulation Act to empower the Reserve Bank of India (RBI) to issue directions to banks to initiate resolution process with more transparency.

Under the new law, the RBI can "issue directions to any banking company to initiate insolvency resolution process in respect of a default, under the provisions of the Insolvency and Bankruptcy Code, 2016."