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The service of olds loans is taking away a major portion of new debt for BSE-500 companies…

Analysing the cashflow statements of BSE-500 companies who have come out with their FY-12 annual reports (excluding finance and banking companies), an interesting fact has emerged. These (292) companies together have used 62 per cent of the new debt raised for servicing old debt, including the interest portion, and are therefore left with just 38 per cent of the funds for further operations.On aggregate basis, the new lending for these 292 companies increased by 33 per cent compared to FY-11.

The amount of new debt taken and the increased interest rate on it has seen the total interest outgo go up by 34 per cent. Repayment of long-term borrowings has also risen by 17 per cent. All these factors have led to companies in this universe being left with only two-fifths of the funds borrowed. This might have a serious impact on the companies looking for business expansion even as the current economic climate remains bleak.