Interest cost up after 4 years for India Inc

                      Change in interest cost in 2004-2005

Sectors

Q1 FY05

Q2 FY05

Q3 FY05

Q4 FY05

Steel

-32.47

-148.58

50.09

220.56

Oil

-37.95

38.41

23.84

116.62

Telecom

44.69

-4.57

-43.38

60

Diamond & jewellery

4.17

-0.06

-0.09

30.57

Shipping

26.94

61.69

4.86

17.53

Electrical equipment

-6.02

-0.18

-0.44

12.98

Diversified

71.42

55.25

-198.82

12.93

Tractors

7.24

1.24

-5.46

9.47

Food processing

-1.36

1.12

3.97

9.18

Engineering

4.41

7.99

2.91

7.44

 During the March ended quarter, almost 54 per cent of the 1,500 companies showed a rise in interest outgo compared with 33 per cent in the first quarter ended June 2004.  The number of companies showing a rise in interest costs was around 35 per cent in the second quarter ended September 2004 and 37 per cent in the third quarter ended December 2004.  This trend marks the end of the low interest rate regime which began in the third quarter of FY02, when interest cost of the corporate sector declined by Rs 125 crore compared with the same period in the previous fiscal.  With debt-laden companies going for debt restructuring, and healthy companies swapping high-cost loans with low interest ones, the corporate sector saved over Rs 7,000 crore in nine quarters thereafter between March 2002 and March 2004.  Things began to change in the first quarter of FY05 when bond yields started rising.  Rising yields on the 10-year government paper in the first quarter of FY05 marked the beginning of the end for the low interest rate regime. Savings in interest costs started declining thereafter with these savings being trimmed to Rs 128 crore in the first quarter of FY05.  However, interest costs declined by Rs 382 in the second quarter and by Rs 594 in the third quarter. In a complete reversal of trend, interest costs went up by Rs 206 crore in the fourth quarter.