Key Points
Despite a 60 basis point ( 0.60 percent) rise in policy rates between September 2022 and September 23, corporate debt servicing as measured by interest coverage ratio improved from 4.49 in September'22 to 5.64 in September 23 implying higher lending rates have not hit debt servicing capacity of Indian firms...
The improvement ICR goes to show that the fear that higher repo rate leading to higher lending rates would pressurise companies has been put aside, a report by Bank of Baroda said.. Interest cover ratio of the companies has shown a marked improvement, led by both lower growth in interest costs as well as higher growth in profits said Aditi Gupta, economist at Bank of Baroda in a report..
Even so, the ICR has shown an improvement as the higher interest costs have been offset by a sharp uptick in profits Gupta said.. Interestingly the 10 largest indebted sectors such as power, crude oil, infrastructure, realty, automobiles, chemicals, logistics and textiles, besides the telecom and iron and steel have witnessed improvement in their ICR...
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