The news of Kingfisher Airlines' default on the repayment of banks' loans is doing the rounds these days. Also, the problem of rising non-performing assets (NPAs) of Indian banks, especially public-sector ones, manifested itself lately when many public-sector banks reported dismal quarterly numbers. We looked into the consolidated debt of the largest business groups in India to see how they stand on the paying capacity. The table below shows the top 20 debt-takers in India from the listed universe.
Public-sector undertakings (PSUs) have the highest debt, but they also have one of the highest interest-coverage ratios (ICRs). This means PSUs at least have the paying capacity amongst the debt-takers. Other big groups which are in the safe zone and have good paying capacity are Videocon, Tata, Mahindra & Mahindra, Bharti and the Mukesh Ambani group. These groups have ICRs of more than two and healthy returns on capital.
The groups in the red zone include GVK Reddy, GMR, Lanco, Vedanta, ADAG, DLF, Jaiprakash, Amtek, Om Prakash Jindal, IL&FS and Adani. These have low ICRs and insufficient returns on capital to cover the finance costs.
Since this analysis is done at the group level, it is not indicative of the strength of individual companies. Nor does it rule out the impact of one or a few companies of a group impacting the overall situation of the group. Hence, you must exercise caution before forming an opinion.
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