ET Bureau MUMBAI: Indian companies are still subdued because of slow pace of improvement in infrastructure, a meltdown in global commodity prices and anemic trends across domestic consumption-driven sectors a report by rating agency ICRA said.
Metals and infrastructure and construction sectors are the ones under the most pressure because of both domestic as well as global challenges with iron and steel companies for example witnessing a sharp contraction in coverage indicators during the year as earnings were adversely impacted by a decline in steel prices as well as competition from cheaper imports.
Subrata Ray, senior group vice president & co-head corporate sector ratings, ICRA, said that nearly 21% of the entire debt (Rs 26.71 lakh crore) of 507 companies in ICRA’s sample had interest cover of less than 1 time as on March 2016 and about 65% of this debt (with interest cover less than 1 time) came from infrastructure & construction, power and steel companies.
However, some sectors which were previously stretched had shown an improvement in their interest coverage like airlines and sugar. “For example, lower ATF prices saw Airlines earnings improve substantially, and a correction in demand-supply in both the domestic and international markets, witnessed a sharp recovery in sugar prices,” Ray said.
Metals and infrastructure and construction sectors are the ones under the most pressure because of both domestic as well as global challenges with iron and steel companies for example witnessing a sharp contraction in coverage indicators during the year as earnings were adversely impacted by a decline in steel prices as well as competition from cheaper imports.
“The pressure on debt-servicing indicators in the Infrastructure & Construction sectors (that is average interest coverage for the last four quarters stood at 1.0 times) also remained unabated, owing to continuation of structural challenges (slow pace of project execution, delays in land acquisition and other allied issues) and limited improvement in balance sheet strength,” ICRA said.
Subrata Ray, senior group vice president & co-head corporate sector ratings, ICRA, said that nearly 21% of the entire debt (Rs 26.71 lakh crore) of 507 companies in ICRA’s sample had interest cover of less than 1 time as on March 2016 and about 65% of this debt (with interest cover less than 1 time) came from infrastructure & construction, power and steel companies.
However, some sectors which were previously stretched had shown an improvement in their interest coverage like airlines and sugar. “For example, lower ATF prices saw Airlines earnings improve substantially, and a correction in demand-supply in both the domestic and international markets, witnessed a sharp recovery in sugar prices,” Ray said.
Get Unlimited Access to The Economic Times
