Indian Companies’ Debt Growth Slows to 2.9% in FY25
Indian companies are now looking within to fund their growth. A recent report by the Bank of Baroda highlights a significant slowdown in debt accumulation over the past five years.
Understanding Debt Growth Trends
The research focused on the debt levels of non-financial corporates. It revealed that total borrowings increased from Rs 20.7 lakh crore in FY21 to Rs 22.6 lakh crore in FY25. This shows an annual growth rate of 2.9%.
This rate is much lower than the 8.7% growth seen between FY15 and FY20. The report stated, “Debt growth in the five years up to FY25 was slower than in the previous five-year period.”
Year-by-Year Debt Growth
Debt growth has varied each year:
- FY21 saw a rise of 5.9%.
- FY22 experienced a drop to 1.4%.
- FY23 had an increase of 5.7%.
- FY24 saw a decline of 0.7%, mainly due to deleveraging.
Corporate Investment and Internal Funding
Even with reduced borrowing, corporate investment in fixed assets stayed strong. This suggests that firms are using internal profits more for expansion rather than relying on external debt.
Sector-wise Insights
The report also broke down the data by sector:
- Power, crude oil, telecom, and infrastructure sectors still lead in corporate debt.
- Out of 25 sectors studied, 13 had a debt growth rate higher than the overall average of 2.9%.
- Telecom, power, and infrastructure-related industries saw significant growth in debt levels.
Corporate Debt and Gross Value Added
The report looked at how corporate debt levels respond to changes in Gross Value Added (GVA). It found that this relationship has weakened since FY20. This means companies are increasingly using internal profits to fund growth instead of borrowing.
The findings indicate that companies are becoming more financially prudent. They are taking on less debt and paying off existing loans.
