India Inc’s interest expenses dip in Q2

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Aggregate interest outgo of 225 companies falls by 12% to Rs 11,037 crore in Sept quarter

Interest outgo of India Inc is beginning to show signs of receding, if the July-September quarter is any guide.

Midway through the earnings season, Capitaline data for 225 companies, excluding banks and financials, in the BSE-500 index show that aggregate interest outgo fell by 12 per cent to Rs 11,037 crore from Rs 12,566 crore in April-June.

Interest outgo for BSE-500 companies at June end were 12 per cent higher at Rs 33,247 crore than in January-March.

Analysts say these are early days yet, but the overall interest outgo at the end of the current earnings season could still be marginally lower than in the preceding quarter, primarily due to RBI action on the monetary front.

In April, RBI cut the repo rate by 50 basis points to eight per cent, beating market expectations of just a 25 basis point cut. RBI has also over time lowered cash reserve ratio by 100 basis points to increase money supply and force banks to cut lending rates.

Rikesh Parikh, vice-president of markets strategy and equities of Motilal Oswal Financial Services, said, “Short-term borrowing costs came down by around 50 basis points in the quarter, helping companies on their interest cost front. Though this quarter will not see a significant decline in interest outgo, it will still be marginally lower than in April-June. Banks are still hesitant to cut rates, and when there they do interest outgo will decline.”

Some companies in the cement, fertiliser and pharmaceutial sectors showed a fall in interest expenses from the level in the preceding quarter. ACC’s interest costs declined to Rs 26 crore from Rs 30 crore, Ambuja Cements’s to Rs 17 crore from Rs 18 crore, and India Cements’ to Rs 67 crore from Rs 95 crore.

In fertiliser, Coromandel International saw interest outgo decline to Rs 45 crore from, Deepak Fertilisers to Rs 16 crore from Rs 27 crore, and RCF to Rs 14 crore from Rs 24 crore.

Sonam Udasi, research head of IDBI Capital, said the signs were encouraging, but one must wait till the earnings season is over, and this could throw a different picture.

“But I would say that with the recent cuts in repo rates and CRR, several small and big companies could have benefited from stable interest rates and seen a moderation in total cost. One has also to see if highly indebted companies with high debt have managed to bring down their costs, rather than cash-rich companies,” Udasi said.

Among such companies Aban Offshore saw its interest costs fall to Rs 298 crore from Rs 312 crore and Adani Ports saw fall in interest costs to Rs 243 crore from Rs 325 crore. For Sesa Goa the costs were Rs 82 crore, down from Rs 118 crore. For Sterlite Industries too interest costs came down to Rs 178 crore from Rs 242 crore.

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