While India Inc is likely to be heaving a sigh of relief at the pause in rate hikes, analysts and investors would be revaluing those stocks where the interest rate component is high. These companies stand to see their interest burden stabilise to the extent of what further rate hikes would have added to it.

FC Research Bureau sifted through first two quarters’ data from the Capitaline Neo database for this financial year to identify two sets of companies — first, where the interest being paid was the highest in absolute terms, and second, where the ratio of interest paid to total income was the highest. Banks, other financial sector companies and select public sector companies such as Rural Electrification Corporation and NTPC — which issue tax-saving bonds — were excluded from the analysis. Interest paid figures excluded foreign exchange losses or gains.

The 10 companies in each of these sets (see charts) would welcome the rate hike pause even if their borrowings took place before the RBI’s rate hike spree reached its peak recently. The pause in domestic interest rates would obviously effect only their borrowings in the domestic financial and banking system and not overseas. Till as recently as end of October, RBI was hawkish in its credit policy stance, hiking repo and reverse repo rates at frequent intervals. Its impact was undoubtedly felt as higher borrowing costs raised input costs for the India Inc.

The fact that the rates had reached their peak was evident when some banks did not pass on the October hike to borrowers. Said Kislay Kanth, senior director of research at Mape Securities, “Commercial banks in India had not passed the earlier rate increase and there is no likelihood that lending or deposit rates will see a change in the near future. Banks still await some growth in credit demand to decide their next steps. In general, the tendency could be to provide bigger incentives to borrowers, wherever possible, within the present rate environment.

Among the top 10 companies in terms of absolute value of highest interest payment, DLF was in a perilous state as it paid Rs 1,023 crore interest on its borrowings in the first two quarters of FY12 and this gobbled up one-fifth (20.11 per cent) of its total income of Rs 5,085 crore. GMR Infrastructure, due to its high investments in its Delhi airport venture, had one-fifth (19.98 per cent) of its total income of Rs 3,827 crore go out in the form of interest payment in the first two quarters of FY12. In the same period, JP Associates paid a high sum of Rs 6,372 crore as interest, making up for 13.05 per cent of its total income.

These companies could have the largest benefit of a pause, and the forthcoming fall, in interest rates if their lenders pass it on to them.

The toppers list in terms of highest ratios of interest paid to total income included United Breweries (Holdings), one of whose subsidiaries, Kingfisher Airlines recently raised the red flag of distress to its lenders. But the last two quarters’ figures available for the company were on a standalone basis. As per these figures, 41.25 per cent of the company’s total income of Rs 234 crore went in the form of interest outgo. Interestingly, listed firm Kingfisher Airlines itself had the 11th highest interest outgo of Rs 640.18 crore in absolute terms, which amounted to 18 per cent of its total income in the first two quarters of FY12.

Many of the companies in the toppers list of high ratios of interest paid to total income were infrastructure companies, where typically high investment takes a few years to convert into high revenue streams.