Rising Interest Rates May Affect These 10 Companies With High Sponsor Commitment, Debt-to-Equity Ratio

Pledging stocks is like a double-edged sword. In a slowing economy or bear market, pledging could wreak havoc on developer cash flow. Historically, during economic downturns, corporate profits tend to decline due to a decline in aggregate demand. During the period of rising interest rates, the cost of debt for businesses increases significantly and this scenario could create problems for highly indebted businesses. Here are 10 companies based on high sponsor commitments and a high debt-to-equity ratio in BSE.

Data available with Ace Equity, CMIE Prowess and BSE showed that in FY22, the Mumbai-based multinational mining giant Vedanta has 99.99% of the sponsors’ equity pledged to financial institutions, combined with a considerable leverage ratio of 0.98%. The company reported total debt of Rs 64,102 crore. However, Vedanta also made a net profit of Rs 23,709 crore during the financial year and has a comfortable interest coverage ratio of 7.9 times.

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wind turbine manufacturer Suzlon Energy has 88.54 percent of the sponsors pledged interest and a debt-to-equity ratio of (-1.7) times. It has a total debt of Rs 6390.6 crore and recorded a net loss of Rs 166.2 crore in FY22.

Sundaram-Clayton, the auto and accessories maker, has an 86.92% stake from pledged promoters and a debt-to-equity ratio of 3.16. The company has a total debt of Rs 16029.9 crore while it made a net profit of Rs 821 crore.

Company in the steel sector Jindal stainless steel a 78.07% of sponsors’ equity pledged and a total debt-to-equity ratio of 0.60 times. It has a total debt of Rs 3125.7 crore while it made a net profit of Rs 1806.4 crore during the financial year.

Promoters of strides Pharmaceutical sciences have pledged their 62.20% of shares. The healthcare company has a total debt-to-equity ratio of 1.18 times. The company has a total debt of Rs 2791.96 crore and recorded a net loss of Rs 363.4 crore in FY22.

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Kalpataru Power Transmission has a 52.03% stake from pledged promoters and a debt-to-equity ratio of 0.87 times. The company has a total debt of Rs 3708.9 crore and recorded a net profit of Rs 555 crore in FY22.

IRB infrastructure developers the developers have pledged their 49.12% stake and have a leverage ratio of 1.27 times. The company has a total debt of Rs 15929.8 crore while it made a net profit of Rs 587.6 crore in FY22.

Wockhardt has 47.84% pledged ownership and a leverage ratio of 0.49 times. The pharmaceutical company has a total debt of Rs 1862 crore and recorded a net loss of Rs 279 crore in FY22.

Major player in aeronautics SpiceJet has 44.24% of the pledged promoters’ stake and a debt-to-equity ratio of (-0.41) times. Spicejet has a total debt of Rs 1067.9 crore and reported a net loss of Rs 1744.3 crore in FY22.

Sterling and Wilson Renewable Energy has 39.50 percent ownership from the pledged promoters and a debt-to-equity ratio of 0.48 times. The company has a total debt of Rs 435 crore and declared a net loss of Rs 915.8 crore.

Adani PowerThe promoters of have pledged a 25.33% stake and have a leverage ratio of 2.61. The company declared a total debt of Rs 48,795.7 crore. However, Adani Power made a net profit of Rs 4911.6 crore in FY22.

Dilip BuildconThe promoters of have pledged a 24.99% stake and the company has a debt-to-equity ratio of 2.47 times. Dilip Buildcon has a total debt of Rs 8783.2 crore and declared a net loss of Rs 549.7 crore.

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