<p>The quality of about Rs 40 lakh crore worth of debt outstanding with India Inc has deteriorated for the seventh consecutive month in a row, as defaults are rising.</p>.<p>The debt quality has deteriorated by 0.16 points in November, according to the debt quality index compiled by CARE Ratings. The decrease in debt quality increases the risk of exposure for the creditors.</p>.<p>Currently, in the current financial year, the debt quality has declined by 3.15 points. In October, the debt quality index had touched its new low, only to deteriorate further as the defaults continue to grow.</p>.<p>The decline in the quality of debt has been primarily on the back of crisis in India’s shadow banking sector -- with both non-banking financial corporations (NBFCs) and the housing finance companies (HFCs) witnessing a series of defaults and rating downgrades.</p>.<p>Even when India Inc’s debt bomb imploded in August 2018, with a mammoth default by IL&FS, such decline wasn’t seen in the debt markets. The debt quality stood at 91.37 during that period. The Indian markets were rocked by the default by IL&FS which led to a huge dearth of funds in India’s financial system.</p>.<p>Marred by an asset-liability mismatch, many other shadow banks like Dewan Housing Finance (DHFL) have since defaulted – forcing an unprecedented move by the regulator RBI to drag the company into insolvency proceedings.</p>.<p>On the other hand, Indiabulls Housing Finance has been reeling under a liquidity crunch, forcing the company to sell off many of its subsidiaries.</p>.<p>The debt index had seen a marginal improvement in the months of December last year and February, March and April this year. However, since April, the debt quality, according to the Index has been on the decline.</p>.<p>The highest level seen by the index was in April 2012 at 99.52. The lowest it had touched was in November 2017, when it was 88.8. The dataset comprises of 1,602 companies from Care’s portfolio of 2,980 companies as of March 2012.</p>.<p>At the end of the September quarter, the total outstanding amount of India Inc in the debt market stood at a whopping Rs 30.8 lakh crore, while bank debt to industries and services sector stood at Rs 51.4 lakh crore.</p>.<p>The index by CARE Ratings covers both corporate debt (debentures and bonds – excludes CPs and short-term instruments) and bank facilities (fund-based and non–fund based – excludes short term instruments).</p>.<p>Many of the promoters of various blue-chip companies in India have been recently on a stake sale spree, in a bid to deleverage themselves. Many celebrated Indian-promoters like Subhash Chandra of Zee and Rana Kapoor of Yes Bank had to cut their stake in the companies as pledges by bond debtors got invoked.</p>
<p>The quality of about Rs 40 lakh crore worth of debt outstanding with India Inc has deteriorated for the seventh consecutive month in a row, as defaults are rising.</p>.<p>The debt quality has deteriorated by 0.16 points in November, according to the debt quality index compiled by CARE Ratings. The decrease in debt quality increases the risk of exposure for the creditors.</p>.<p>Currently, in the current financial year, the debt quality has declined by 3.15 points. In October, the debt quality index had touched its new low, only to deteriorate further as the defaults continue to grow.</p>.<p>The decline in the quality of debt has been primarily on the back of crisis in India’s shadow banking sector -- with both non-banking financial corporations (NBFCs) and the housing finance companies (HFCs) witnessing a series of defaults and rating downgrades.</p>.<p>Even when India Inc’s debt bomb imploded in August 2018, with a mammoth default by IL&FS, such decline wasn’t seen in the debt markets. The debt quality stood at 91.37 during that period. The Indian markets were rocked by the default by IL&FS which led to a huge dearth of funds in India’s financial system.</p>.<p>Marred by an asset-liability mismatch, many other shadow banks like Dewan Housing Finance (DHFL) have since defaulted – forcing an unprecedented move by the regulator RBI to drag the company into insolvency proceedings.</p>.<p>On the other hand, Indiabulls Housing Finance has been reeling under a liquidity crunch, forcing the company to sell off many of its subsidiaries.</p>.<p>The debt index had seen a marginal improvement in the months of December last year and February, March and April this year. However, since April, the debt quality, according to the Index has been on the decline.</p>.<p>The highest level seen by the index was in April 2012 at 99.52. The lowest it had touched was in November 2017, when it was 88.8. The dataset comprises of 1,602 companies from Care’s portfolio of 2,980 companies as of March 2012.</p>.<p>At the end of the September quarter, the total outstanding amount of India Inc in the debt market stood at a whopping Rs 30.8 lakh crore, while bank debt to industries and services sector stood at Rs 51.4 lakh crore.</p>.<p>The index by CARE Ratings covers both corporate debt (debentures and bonds – excludes CPs and short-term instruments) and bank facilities (fund-based and non–fund based – excludes short term instruments).</p>.<p>Many of the promoters of various blue-chip companies in India have been recently on a stake sale spree, in a bid to deleverage themselves. Many celebrated Indian-promoters like Subhash Chandra of Zee and Rana Kapoor of Yes Bank had to cut their stake in the companies as pledges by bond debtors got invoked.</p>
