Firms better placed to service debt

Interest coverage ratio improves to 3.95 times in Q1

In what could be music to lenders’ ears, corporate India is showing initial signs of improvement in its debt-servicing capability.

The combined interest coverage ratio (ICR) for 1,822 companies, excluding financial and oil and gas companies, improved to 3.95 times during the first quarter of 2017-18 from 3.85 times in the previous quarter. This means corporate India’s operating profit is now enough to cover nearly four quarters of interest payments. However, on a year-on-year basis, the ICR worsened. The ratio was 4.1 during the April-June 2016 period. The ratio of operating profit and interest obligation, the ICR indicates a company’s debt-servicing