* Rs 5,183 crore in interest costs saved * Savings at 14.5% of net profit
Corporate India repaid Rs 8,088 crore in debt in 2002-03. However, some companies borrowed more, replacing costly debt with cheaper loans. Companies also replaced short-term loans with long-term ones.
As a result, India Inc saved Rs 5,183 crore in interest cost, or almost 64 per cent of the decline in borrowing. Interest cost savings accounted for 14.5 per cent of the net profit of these companies.
The cash flow statements of 968 companies, sourced from the Centre for Monitoring the Indian Economy, show that 597 companies repaid Rs 53,866 crore debt during 2002-03.
But at the same time, their borrowing increased Rs 42,577 crore. The remaining 371 companies borrowed Rs 3,201 crore more.
This suggests that the corporate sector replaced high-cost loans with low-cost ones, taking advantage of low interest rates.
The data also revealed that companies repaid more long-term loans (Rs 37,997 crore) than short-term ones (Rs 15,678 crore).
Moreover, they preferred long-term loans for raising fresh loans. Long-term borrowing increased Rs 30,970 crore, against Rs 11,607 crore for short-term ones.
The aggregate borrowing of the companies studied declined Rs 5,833 crore, from Rs 2,14,304 crore in 2001-02 to Rs 2,08,471 crore in 2002-03.
Reliance Industries was very aggressive in repaying costly loans. Its cash flow statement shows that it repaid Rs 7,626 crore of loans and mobilised a fresh Rs 8,312 crore in 2002-03. In the process, the company cut its interest costs by Rs 270 crore.
The government-owned Hindustan Petroleum repaid Rs 6,124 crore of old loans and replaced them with Rs 5,490 crore of fresh borrowing from the market.
This resulted in a Rs 142 crore saving in interest costs. Indian Oil Corporation repaid Rs 4,715 crore and mobilised Rs 150 crore, thereby saving Rs 782 crore in interest costs in 2002-03.
