With stable finances, Indian companies are better positioned to handle the current economic slowdown, says a report by the DSP Asset Managers.
Indian companies have some of the strongest balance sheets seen in recent history. This is a major shift from previous cycles, where many sectors were weighed down by high levels of debt.
A closer look at the data shows that nearly all key sectors have reduced their debts significantly over the past two decades.
The median Debt-to-Assets ratio–a key measure of financial health–has reached record lows in several industries. This indicates that companies have more stable finances and are in a better position to handle a slowdown and bounce back when growth returns.
The report said, “This cycle has one of the cleanest corporate balance sheets going into a slowdown. This would probably enhance the ability of corporations to ride the slowdown better than the cycles in which indebtedness was elevated”.
Big Improvements in Media, Utilities, Healthcare, and More
For instance, the Media, Entertainment & Publication sector has seen its Debt-to-Assets ratio fall dramatically from 32 per cent in 2003 to just 7 per cent in 2024. Similarly, the Utilities sector, which had a ratio of 46 per cent in 2003, now stands at only 11 per cent.
Other sectors showing marked improvement include Healthcare (from 42 per cent in 2003 to 12 per cent in 2024), Capital Goods (from 39 per cent to 14 per cent), and Chemicals (from 50 per cent to 16 per cent). Even cyclical sectors like Metals & Mining and Construction have brought down their debt levels, strengthening their ability to weather market volatility.
Information Technology, which has historically maintained a lean balance sheet, continues to show a healthy Debt-to-Assets ratio of just 8 per cent, similar to its 2003 level.
Indian Corporates Ready for Recovery
This broad-based improvement across sectors highlights the prudent financial management of Indian corporates over the years. Most companies have taken conscious steps to reduce their debt, improve cash flows, and build stronger foundations.
As a result, India Inc. is better placed today to handle global headwinds, rising interest rates, and economic uncertainties.
The report believed that once economic conditions improve, these companies will be able to recover and grow much faster, thanks to their strong financial footing. It said “With strong balance sheets now in place, these businesses are well-positioned to recover and grow at a faster pace when these industries see some tailwinds”.
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