Glade Guides

On the edge

The following companies may slip into losses if the interest rates in the economy rise or their profits fall

Those who have experienced bungee jumping know what it feels like to be at the verge of falling from a height. Thankfully, their feet are tied with an elastic cord so there are often no casualties when they do fall.

The business equivalent of bungee jumping is seen in the companies listed below. They are at the verge of slipping into losses thanks to their interest outgo on debt. The interest outgo makes a substantial part (more than 80 per cent) of their earnings before interest payments and taxes. If the interest rates in the economy rise further (they have been already on an up-move; recently they were raised by another 25 basis points) or if the operating profits of these companies decline, they may quickly show a loss.

The Z-Score helps assess the probability of bankruptcy of a company. When it is below three, it indicates a critical situation. As seen in the table, many of these companies are below that threshold.

What's more, there is no elastic cord either that can help them avoid severe injuries. What they may be feeling now and what their investors will feel eventually is anybody's guess.

Getting interest-ing

Company nameDebt to equityEBIT
(Rs cr)
Interest (Rs cr)Interest as % of EBITZ-Score
Bharat Wire Ropes3.7252598.80.97
Elpro International0.8343498.42.69
IL&FS Transportation Networks7.93922376095.90.52
Healthcare Global Enterprises1555395.83.71
Tata Power Company3.33926373795.20.09
Snowman Logistics0.3131294.96.05
Reliance Infrastructure4.96979650393.20.23
Gayatri Projects4.327925892.82.64
Future Enterprises1.563357891.32.47
Hindustan Construction Company-8.970363990.9-1.13
Hotel Leela Venture9.8938489.6-0.74
GVK Power & Infrastructure-53.31836164389.5-1.23
Shristi Infrastructure1.8302788.13.28
Bharti Airtel1.610708935587.40.87
Shriram EPC0.711910386.21.02
Coffee Day Enterprises242636485.41.77
Bannari Amman Spinning Mills2.1716084.41.7
BGR Energy Systems1.6346287831.2
MEP Infrastructure Developers50.757447081.80.89
Lemon Tree Hotels1.6967881.55.4
Electrosteel Castings0.826421480.91.04
Data as on August 13, 2018. Minimum cut-off of market cap is Rs 300 crore.
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