InvestorQ : How is the Indian debt situation of companies? Has it worsened in the last few years?
Riya Dwivedi made post

How is the Indian debt situation of companies? Has it worsened in the last few years?

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rhea Babu answered.
12 months ago
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The situation has actually become quite tight in the last few quarters. For example, companies need to repay an amount Rs.5.9 trillion ($83 billion) of domestic debt this year, at a time when corporate defaults are already beginning to spike. You must be aware that the IIP and GDP growth are at the lowest level since 2009 and that is only adding to the pressure of debt in the books of the companies. This has created a credit market scare and puts India behind China, Indonesia and a few others in the region.

One of the key drivers of the problem is the lingering crisis at NBFCs that started in the middle of 2018 with the default by IL&FS. Interestingly, IL&FS was AAA rated at that point of time. The second big worry came in the form of Dewan Housing Finance Corporation since these two companies had a joint debt in excess of Rs.2 trillion approximately. The trigger effect could be quite strong for these companies. Despite signs of recovery in certain segments, the shadow bank sector is still under a tremendous funding squeeze which has been instrumental in keeping borrowing costs high.

The bigger worry is that if the growth rate does not pick up in the next few quarters then the pressure on loan repayments could get that much tighter. That is not great news.

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