Easy Money Drives India Inc.'s Finance Costs To 10-Quarter Low
India Inc.’s finance costs have fallen to the lowest in 10 quarters as lower interest rates and the central bank’s accommodative monetary policy help maintain ample liquidity in the markets.
The finance costs of India's top 200 companies on the S&P BSE 200 Index, excluding banks and financial services firms, fell to the lowest to Rs 44,980 crore in the three months through September, according to BloombergQuint's calculations. That's the lowest since the quarter ended March 2019.
In 2020-21, the Reserve Bank of India cut the headline repo rate to a record low to boost liquidity in the markets following the Covid-19 pandemic. The fixed-rate reverse repo rate was reduced to encourage banks to withdraw their surplus funds parked with RBI and lend it in the market. The repo and reverse repo rate now stand at 4% and 3.35%, respectively.
Companies also raised funds by selling stakes and also via credit markets to repay debt. Together, that helped lower borrowing-related costs.
Industrials—including machinery, electrical equipment and transportation infrastructure—information technology and materials comprising metals, construction materials sectors pared their finance costs by most in the past three quarters.
Consumer staples and discretionary items and communication services, however, saw an increase.
That comes as companies, including consumer goods makers, face rising raw input costs that are squeezing their margins. Others like automakers and paintmakers are facing the brunt of the global shortage of semiconductor chips in addition to input cost inflation.
BloombergQuint analysed the finance costs data of BSE200 companies over the past four quarters to identify stocks that witnessed a consistent increase and decrease in the metric so far in 2021.
BSE200 companies considered.
20 companies saw a consistent fall in finance costs in the past three quarters.
Finance costs rose for 10 stocks during the period.
Jindal Steel and Power Ltd., Adani Power Ltd. and Mahindra & Mahindra Ltd. managed to cut their finance costs the most during this period in absolute terms. They were followed by Hindustan Zinc Ltd. and Hindustan Aeronautics Ltd.
(Corrects an earlier version that misstated the units in sectoral finance costs)