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Companies with high debt should raise a red flag as far as investors are concerned. Shares of these companies are high risk.
If sales were to slowdown, the net profit will take a double blow because the interest payments will remain the same. Thus the market looks at companies with high debt sceptically.
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| Company | CMP (Rs) | Total Debt (Curr FY, Rs m) | D/E (Curr FY, x) | MCap (Rs m) | P/E (x) | P/BV (x) | Div Payout Ratio |
|---|---|---|---|---|---|---|---|
| ADANI GREEN ENERGY | 1,534.0 | 542,710 | 9.2 | 2,429,827 | 217.3 | 30.6 | 0.0 |
| TVS MOTORS | 1,968.1 | 216,262 | 3.9 | 934,995 | 61.0 | 14.8 | 18.1 |
| ADANI TRANSMISSION | 1,028.2 | 341,988 | 2.9 | 1,146,950 | 83.0 | 9.6 | 0.0 |
| TATA MOTORS | 724.6 | 1,256,605 | 2.8 | 2,407,735 | 15.8 | 4.5 | 32.5 |
| BHARTI AIRTEL | 989.3 | 1,655,448 | 2.1 | 5,952,535 | 65.8 | 7.6 | 19.4 |
| VEDANTA | 259.8 | 798,830 | 2.0 | 965,542 | 11.2 | 3.1 | 260.3 |
| TATA POWER | 326.6 | 489,744 | 1.7 | 1,043,598 | 44.0 | 3.5 | 16.8 |
| M&M | 1,634.8 | 887,670 | 1.6 | 2,032,921 | 18.4 | 3.4 | 15.9 |
| POWER GRID | 231.7 | 1,265,949 | 1.5 | 2,154,950 | 13.7 | 2.5 | 66.7 |
| NTPC | 302.8 | 2,200,219 | 1.5 | 2,935,666 | 15.3 | 1.9 | 41.1 |
| ADANI POWER | 511.8 | 422,521 | 1.4 | 1,973,981 | 9.6 | 4.9 | 0.0 |
| L&T | 3,476.3 | 1,185,134 | 1.3 | 4,778,342 | 33.0 | 6.1 | 26.7 |
| GRASIM | 2,042.5 | 1,013,479 | 1.3 | 1,344,882 | 11.8 | 1.6 | 5.9 |
| JSW STEEL | 854.9 | 788,420 | 1.2 | 2,090,496 | 21.9 | 2.8 | 19.8 |
| ADANI ENTERPRISES | 2,807.4 | 383,196 | 1.2 | 3,200,439 | 129.5 | 8.7 | 6.2 |
| BPCL | 446.4 | 611,109 | 1.1 | 968,354 | 3.8 | 1.4 | 40.0 |
| ADANI PORTS & SEZ | 1,027.6 | 505,184 | 1.1 | 2,219,651 | 34.9 | 4.6 | 20.0 |
| IOC | 123.7 | 1,401,148 | 1.0 | 1,746,797 | 4.4 | 1.0 | 36.2 |
| HINDUSTAN ZINC | 309.9 | 121,480 | 0.9 | 1,309,426 | 15.5 | 9.6 | 303.5 |
| TORRENT PHARMA | 2,215.2 | 52,973 | 0.9 | 749,707 | 56.2 | 11.2 | 59.8 |
| BRITANNIA | 5,159.4 | 29,805 | 0.8 | 1,242,736 | 49.2 | 43.6 | 74.9 |
| TATA STEEL | 133.5 | 780,177 | 0.8 | 1,641,684 | NM | 1.9 | 54.4 |
| VARUN BEVERAGES | 1,237.2 | 36,948 | 0.7 | 1,607,324 | 78.8 | 22.9 | 7.3 |
| MACROTECH DEVELOPERS | 937.8 | 90,486 | 0.7 | 904,431 | 58.7 | 7.2 | 19.7 |
| HINDALCO | 570.0 | 639,700 | 0.7 | 1,280,913 | 15.2 | 1.3 | 6.6 |
* We show NM where the values are negative
Disclaimer: This is for information purposes only. These are not stock recommendations and should not be treated as such. Learn more about our recommendation services here... Also note that these screeners are based only on numbers. There is no screening for management quality.
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Which company has the highest debt?
As per Equitymaster's Stock Screener, these listed companies have the highest debt in India right now...
The below list is filtered by taking into account the company's latest debt to equity ratio and total debt.
High debt companies come under huge trouble in a rising interest rate scenario and during uncertainty. In such environment, your job is to sit on stocks which have a decent track record, pay regular dividends, and have low or zero debt.
Dividend paying stocks because your portfolio will have some cushion from the yields they provide.
And debt free because higher interest rates can just as easily bring down the high debt companies.
What is considered a high level of debt?
Analysts use the debt to equity ratio to measure how much debt a firm uses relative to its equity.
A high debt to equity ratio is risky. Ideally, a ratio less than 1 is considered good, while anything above 2 is highly risky.
We highly recommend you check out Equitymaster's Indian Stock Screener and its segments. Here are some of the screens related to debt.
Could higher interest rates bring down high debt companies?
Higher interest rates need not spell doom for companies. In fact, in the case of some companies such as banks and NBFCs, a higher interest rate environment could propel growth.
Moreover, debt can help companies grow and expand. It's only when the debt is unserviceable that the company will find itself in trouble.
Which companies have no debt?
As per Equitymaster's Stock Screener, these are some of the companies which have no debt on their books.
- #1 ABB INDIA
- #2 BHARAT ELECTRONICS
- #3 BAJAJ HOLDINGS & INVESTMENT
- #4 CG POWER & INDUSTRIAL
- #5 DIVIS LABORATORIES
Investors have a liking for debt free stocks as they have the ability to tide over higher interest rate environments.
Should you totally avoid interest rate sensitive stocks?
It depends upon an individual's risk appetite. In a rising interest rate scenario, high debt stocks are the ones you should definitely avoid.
As central banks increase interest rates to curb inflation, it puts a lot of pressure on stock prices. Resultantly, interest rate sensitive stocks like high debt companies bear the brunt.
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I'm well-versed in financial markets and analysis, especially concerning the impact of debt on companies and investor decisions. High debt levels can significantly influence a company's performance and shareholder confidence. The article discusses how companies with substantial debt can raise concerns among investors due to increased risk. If sales slow down, the double impact on net profits, coupled with fixed interest payments, makes these firms a risky investment.
The debt-to-equity ratio is a vital metric used to measure a company's debt relative to its equity. A high ratio, typically above 2, is considered risky. The data provided lists several companies, their current market capitalization, debt levels, debt-to-equity ratios, and other financial metrics, including Price-to-Earnings (P/E) ratio and Dividend Payout Ratio.
The article emphasizes the importance of analyzing management quality beyond numerical data and suggests focusing on dividend-paying and debt-free stocks. It also highlights that in a rising interest rate scenario, high-debt companies face more significant challenges, while debt-free companies provide stability.
Several sectors are listed, each with companies categorized by market capitalization, offering insights into diverse industries. Additionally, the article provides stock screeners related to debt, including lists of debt-free companies and those reducing debt.
It's emphasized that high-debt companies are particularly vulnerable in rising interest rate environments, impacting stock prices. Conversely, some sectors, like banks and NBFCs, can benefit from higher interest rates if managed well. The piece also lists companies without debt, highlighting investor preference for such stocks during high-interest-rate periods.
Ultimately, the article recommends cautiousness with high-debt stocks during rising interest rates, urging investors to consider their risk appetite. It suggests using Equitymaster's Stock Screener for in-depth analysis and creating personalized queries to make informed investment decisions.
