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HindustanTimes Sat,19 Apr 2014

Credit metrics of BSE 500 cos weakest since 2008, says report

PTI  New Delhi, July 17, 2013
First Published: 21:51 IST(17/7/2013) | Last Updated: 23:36 IST(17/7/2013)

The credit metrics of BSE 500 corporates, an index of 500 top public listed firms, (excluding banking and financial services) have deteriorated to their lowest level since financial year 2008, a report said.

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The report by India Ratings , the Indian arm of Fitch, said there is a significant rise in debt levels without a commensurate increase in cash margins of these firms and amid mounting economic stress, credit metrics of these companies are “unlikely” to show a significant improvement in FY14.

The report further noted that the current business environment is more challenging and stressful than the conditions in 2001-03 and during the second half of FY09.

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In such situations, corporates have to depend upon the strength of their own balance sheet as well as on their ability to generate free cash flows and maintain a liquidity cushion, it said.

 From 2009 to 2012, debt levels registered an average yearly growth of 20% but there was moderate growth in debt levels in fiscal year 2013 (10% year-on-year) largely owing to low capex and banks’ aversion to incremental lending particularly to certain stressed sectors.

Also going forward, a significant rise in debt level in FY14 was not envisaged as a majority of the incremental debts are likely to be raised for expanding working capital cycle.

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