Top 500 cos over-leveraged, recovery still away: Ind-Ra

Mumbai: Although credit metrics of the largest listed corporates have shown signs of improvement, a full recovery is still some time away, says a report.

"The credit metrics of the largest listed 500 corporate borrowers are showing signs of bottoming out, but any claims of a recovery in the system-wide credit profile may be early," India Ratings said in a study Wednesday.

The rating agency took top 500 listed corporates, excluding banking and financial services, with highest balance sheet debt as of 2013-14 for its study. These corporates account for total balance sheet debt of Rs 31.99 trillion in 2014-15.

Around 69 percent of the debt was from five sectors - power, metals & mining, oil & gas, infrastructure & construction and telecom.

The agency said in 2014-15, these top corporates' leverage (median) was estimated at 4.33 times compared to 4.65 times in 2013-14.

"This is the first time since FY10 that the median leverage has fallen on a year-on-year basis," the agency's Senior Director (Corporate Ratings) Deep N Mukherjee said.

In 2014-15, the aggregate absolute revenue and EBITDA of these corporates grew at a paltry one percent and six percent, respectively.

"This is the weakest revenue growth since the global financial crisis in FY09. This may be attributed to the disinflation in the economy," Mukherjee said.

"To the extent company financials are nominal (not adjusted for inflation) a dis-inflationary environment may have a temporary damping effect on revenue and earnings growth," the rating agency said.

The margin stabilisation of corporates is not uniform and thus continues to remain worrisome.

Despite the moderation in leverage, the vulnerability of corporates may have increased in 2014-15 compared to 2013-14, the study said.

The rating agency's analysis of leverage and debt by industry suggests that sectors such as auto and chemicals are experiencing the least stress.

Most players in the auto sector tend to have lower leverage than other capital intensive sectors.

Real estate, FMCG, metals &mining and textile remain the most troubled, it said.

Several players in the infrastructure space and real estate have directionally reduced their leverage levels, more often by asset sales, even though on an absolute basis they remain high, says the study.