Caution ahead: After deleveraging spree, corporates are resorting to borrowings again
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21 19 share of stressed companies dropped to 15–20%, and among large businesses in these sectors, it declined to just 4–5% (from about 32% earlier in Q1FY21), the analysis found. These improved balance sheets are most likely to drive capital expenditure in near term and aid in India’s infrastructure push, Bhattacharya said.
Meanwhile, there are notable signs of recovery in sectors that rely on consumption demand. Retailing and hospitality, which bore the brunt of reduced discretionary demand during covid, have recovered sharply, as the share of stressed firms has fallen off their peaks. However, at the bottom of the pyramid, the resilience of demand recovery is still in question, and is awaiting a broad-based recovery to sustain the momentum, Bhattacharya said.
POCKETS OF STRESS
The study observed a build-up of stress in export-centric sectors, with the world going through macroeconomic and geopolitical turmoil. This trend was fairly pronounced for textiles, chemicals and the diamond industries. A recent rise in freight costs due to the Red Sea crisis could pose further risks. “A select few sectors will see stress on account of freight cost build-up,” said Bhattacharya, adding that some export-oriented sectors were already showing signs of increased stress and would be more severely impacted.
Other segments with persistently high stress despite some recent improvement included telecom and engineering, procurement, and construction (EPC), with around 39% and 33% firms, respectively, having an ICR below one.