Debt is an important parameter that we check while analysing a company. It is an important source from which companies raise capital for their business apart from equity. Having an ideal amount of debt can help to reduce the cost of capital of a company, however, too much of it can pose threats to its business.
Here are three companies that have reduced their debts significantly in the past three years:
ICICI Lombard General Insurance Company Ltd
The company is a leading and established private sector general insurer in India. It offers a well-diversified range of products and risk management solutions through multiple distribution channels. Its shares closed at ₹ 1144.90 apiece on Friday and it is a large-cap company with a market capitalization of ₹ 56,225 crores.
ICICI Lombard has reduced its debt by 47.42% from ₹485 crores in FY19 to ₹ 255 crores in FY22. Currently, the company is almost debt-free with an ideal debt-to-equity ratio of 0.03. Further, it has a very high-interest coverage ratio of 47.29, indicating that it is poised to pay its debts and interest costs.
Alkyl Amines Chemicals Ltd
Alkyl Amines is a leading manufacturer of aliphatic amines, speciality amines and amine derivatives. It supplies these products to pharmaceutical, agrochemical, water treatment, rubber chemical and a variety of industries. It is a mid-cap company with a market capitalization of ₹ 14,916 crores and its shares closed at ₹ 2919.50 apiece on Friday.
The company has reduced its debt by 86.21% from ₹ 165 crores in FY19 to ₹ 23 crores in FY22. The company has an ideal debt-to-equity ratio of 0.02 and is almost debt free. It has a high-interest coverage ratio of 89.07.
Bajaj Electricals Ltd.
Bajaj Electricals is a part of the Bajaj Group of companies. is a leading FMEG company spread across Consumer Products – Appliances, Fans, Lighting, Exports, and EPC – Illumination, Transmission Towers and Power Distribution. Further, it has a presence in premium home appliances and cookware segments with brands like Morphy Richards and Nirlep. It is a mid-cap company with a market capitalization of ₹ 13,843 crores and its shares closed at ₹ 1203.85 on Friday.
The company has reduced its debt by 94.29% in the past three years, from ₹ 1,590 crores in FY19 to ₹ 91 crores in FY22. It has an ideal debt-to-equity ratio of 0.03 and a good interest coverage ratio of 4.57.
Written by Simran Bafna
Disclaimer
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