Capex cycle weakens in FY17, slows corporate credit growth: report
Indian companies, excluding RIL, grew assets by only 4.3% in FY17, and bulk of it was driven by telecom, energy and utility companies, says ICICI Securities report
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Mumbai: The capital expenditure or capex cycle weakened in FY17 resulting in the slowdown of corporate credit growth at 5%, said ICICI Securities Ltd after analyzing 3,071 non-financial companies which have filed their abridged balance sheets for FY17 with the exchanges.
According to the brokerage firm, Indian companies (excluding Reliance Industries Ltd) grew assets by only 4.3% in FY17, and bulk of it was driven by telecom, energy and utility companies. Mid-caps posted negligible growth of 3%, small-caps registered a degrowth (-0.4%), fixed assets (-1.3%), while intangibles registered a growth of 6.8%.
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“Of the net growth in fixed assets and intangibles of Rs2.7 trillion, RIL added Rs1.1 trillion resulting in an overall growth of 6.3%,” it said in a 3 July report.
It added that as capex cycle weakened, loan funds of 3,071 non-financial companies grew by a mere 5.5% in FY17. Majority of the credit growth was contributed by large-caps (12%), while mid-cap (0.4%) and small-cap companies (nil) had negligible credit growth. “Amongst capital intensive sectors credit growth was positive for energy (17%), telecom (14%), cement (11%) and utilities (5%), while industrials (-3%), materials (-11%) and metals (0%) had a contraction in credit growth,” the report authored by analysts Vinod Karki and Siddharth Gupta said.
The brokerage firm also said that at an aggregate level, Indian companies reduced its cash pile by 9% but investments in marketable securities and strategic investments rose significantly by 24%.
Another observation it made analysing the 3,071 non-financial companies is that top 26 stressed companies reduced their debt pile by 2% driven by significant debt reduction by Suzlon, GMR Infra and Tata Communications.
However, debt-to-equity ratio deteriorated as mounting losses reduced equity capital. “Stress was defined as interest service coverage being less than 2 and gross debt/equity being higher than 2. These 26 represent the largest debts, approximately above $1 billion,” it explained.