The leverage profile of India Inc at the end of 2013-14 is a good indicator of the extent of challenges it faced through the financial year. Of the total 1,710 companies that were saddled with debt at the end of the fiscal, 666 companies or about 40 per cent having a total turnover of Rs 13.4 lakh crore managed to cut down their net debt by Rs 51,238 crore to Rs 3.7 lakh crore.
On the other hand, the net debt of the remaining 1,044 companies with a total turnover of Rs 35.8 lakh crore increased Rs 4.4 lakh crore to Rs 18.8 lakh crore. The top 10 companies that reduced their debt managed to cut net debt by a little over Rs 17,000 crore.
Healthcare firm Fortis Healthcare tops the list – reducing its net debt by Rs 3,204 crore. DLF, Essar Oil, Apollo Tyres, Welspun Corp and Coromandel International are the other companies that figure in the top 10 list. These companies managed to slash their net debt by a variety of means, including accruals from business, restructuring of business or loans and fundraising.
Fortis Healthcare, for instance, managed to raise funds through listing of its business trust. Realty firm DLF achieved deleveraging via asset sale and fundraising through equity. Essar Oil cut down debt through accruals from business though its overall debt is very high.
Welspun Corp deleveraged through demerger of its non-pipe business. Improved operations enabled Apollo Tyres to cut its debt. On the other hand, the top 10 companies to pile on the maximum net debt have altogether added 2.17 lakh crore over the previous year. These are mostly heavy industries requiring large investments.
Sesa Sterlite tops the list with Reliance Industries trailing closely. Reliance Industries, ONGC and NTPC, despite increasing debt, have debt equity ratios below 1.
“Excluding companies in fast moving consumer goods ( FMCG), IT and banking sectors, most companies were forced to take the debt route since it was not easy to raise funds through equity on account of lack of growth opportunities, strained balance sheets and sluggishness in stock market,” said G Chokkalingam, managing director, Equinomics Research & Advisory.
However, industry experts believe that with the market booming to new highs and business sentiment improving, the current fiscal is likely to see fundraising through equity back in fashion. This should also help rationalise the debt equity ratios of the companies.