05-06-2007, 11:27 AM
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>India Inc hit hard by rising interest rates: Assocham</b>
Pioneer.com
PTI | New Delhi
India Inc's bottomlines were hit hard by as much as 116 per cent rise in interest rates in the fourth quarter of 2006-07 as the Reserve Bank tightened money supply to combat inflation, industry chamber Assocham said.
"The corporate results are an indication toward the demand being impacted in the coming quarter and investment plans being hit, leading to capacity constraints if the cost of money keeps its upward trend," Assocham President Venugopal Dhoot said.
In a survey of 150 companies, Assocham found that the worst-hit companies were from real estate, engineering, IT and financial services, which have witnessed cost of money rising by more than double.
However, there are some sectors like telecom, entertainment and infrastructure that have reduced their borrowing cost, according to Assocham Eco Pulse Study on Interest Cost Analysis of 150 companies during the fourth quarter of 2006-07.
The corporates are still not sure whether the interest rates have peaked or there is still scope of further liquidity squeeze by the RBI.
The real estate companies have suffered the major setback from the central banks money tightening policies as their top-lines as well as bottom-lines have shown a much slower growth than their respective interest costs.
Shrinivasan Shipping and Property Development Ltd has paid 38 times more interest in the fourth quarter of 2006-07 than the corresponding period of the last year whereas its net profit has increased by a mere 11.5 per cent. The interest expenses of <b>Era Constructions have escalated by 545 per cent as compared to 242 per cent, where as total income and net profit went up by 140 per cent rise.</b>
"Clearly, RBI's tight money stance has hit right at the profitability of the companies, adversely affecting the growth of real estate industry," Dhoot said.
The interest burden of the engineering sector has increased more than six times in the reported period. The interest cost of Best Crompton and Engineering Ltd and Alfa Laval India has increased by 640 and 231 per cent while their top lines have grown by merely 11 per cent and 37 per cent respectively.
According to AEP, I<b>T is another sector which saw a huge jump in borrowing costs by 234 per cent due to high interest rate regime in the economy.</b>
<b>Satyam Computer Services and Triton Corporation are among the highest interest bearing IT companies with more than seven times high debt servicing costs in 2006-07</b><!--QuoteEnd--><!--QuoteEEnd-->
Pioneer.com
PTI | New Delhi
India Inc's bottomlines were hit hard by as much as 116 per cent rise in interest rates in the fourth quarter of 2006-07 as the Reserve Bank tightened money supply to combat inflation, industry chamber Assocham said.
"The corporate results are an indication toward the demand being impacted in the coming quarter and investment plans being hit, leading to capacity constraints if the cost of money keeps its upward trend," Assocham President Venugopal Dhoot said.
In a survey of 150 companies, Assocham found that the worst-hit companies were from real estate, engineering, IT and financial services, which have witnessed cost of money rising by more than double.
However, there are some sectors like telecom, entertainment and infrastructure that have reduced their borrowing cost, according to Assocham Eco Pulse Study on Interest Cost Analysis of 150 companies during the fourth quarter of 2006-07.
The corporates are still not sure whether the interest rates have peaked or there is still scope of further liquidity squeeze by the RBI.
The real estate companies have suffered the major setback from the central banks money tightening policies as their top-lines as well as bottom-lines have shown a much slower growth than their respective interest costs.
Shrinivasan Shipping and Property Development Ltd has paid 38 times more interest in the fourth quarter of 2006-07 than the corresponding period of the last year whereas its net profit has increased by a mere 11.5 per cent. The interest expenses of <b>Era Constructions have escalated by 545 per cent as compared to 242 per cent, where as total income and net profit went up by 140 per cent rise.</b>
"Clearly, RBI's tight money stance has hit right at the profitability of the companies, adversely affecting the growth of real estate industry," Dhoot said.
The interest burden of the engineering sector has increased more than six times in the reported period. The interest cost of Best Crompton and Engineering Ltd and Alfa Laval India has increased by 640 and 231 per cent while their top lines have grown by merely 11 per cent and 37 per cent respectively.
According to AEP, I<b>T is another sector which saw a huge jump in borrowing costs by 234 per cent due to high interest rate regime in the economy.</b>
<b>Satyam Computer Services and Triton Corporation are among the highest interest bearing IT companies with more than seven times high debt servicing costs in 2006-07</b><!--QuoteEnd--><!--QuoteEEnd-->