Mutual Fund

77 companies in BSE500 have more than 0.52 chance of default

The number of BSE 500 companies that have crossed a debt-default probability threshold has trebled since the beginning of the year. Vodafone Idea, Dewan Housing, Bombay Dyeing, Srei Infrastructure, Jet Airways, Indiabulls Real Estate, Indiabulls Housing Finance, & Reliance Capital are among 77 companies that have a default risk probability of more than 0.52 per cent compared with 24 at the beginning of 2018, according to Bloomberg data. The stocks of these companies have fallen by an average 49 per cent this year compared with a 5 per cent drop in the BSE 500 index. Globally, investors stay away from companies with a 0.52 per cent chance of defaulting on debt in the next 12 months. The probability is computed by Bloomberg using its proprietary risk model based on parameters such as share price, market capitalisation, share price volatility, short-term debt, longterm debt, interest expense and adjusted cash flow from operations. The 77 companies have a market capitalisation of Rs 6.75 lakh crore, accounting for about 4.5 per cent of the total. There are 37 companies in the sample with a market capitalisation of more than Rs 5,000 crore and 47 belong to sectors other than banking and finance. Their interest coverage, or ability to repay debt, improved to 1.87 from 1.43 in the same period.

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