Top 10 companies with highest D/E ratio of FY19

The first thing that comes to mind after hearing the word ‘Debt’ is a burden. However, in the corporate world, a company requires debt to expand the scale of their business. The Debt-to-Equity ratio shows the extent to which the company is leveraged, lower the ratio better is the financial status of the company.

Generally, D/E should be less than one as it lends financial stability. But there are capital intensive industries like infra, capital goods wherein D/E ratio remains at a higher level compared with the companies that operate in the FMCG and IT space which are like cash-generating machines. Also, if the company is taking debt for future expansion which would result in higher revenue and profitability, then such kind of debt turns out to be healthy for the company.

However, if the company raises debt to meet its working capital requirement, then it is questionable as it cannot even meet its operating expenses with regular business income. Thus, we should stay away from such companies which are not even able to service its debt timely.

Along with D/E, investors should also look for interest coverage ratio. Higher D/E does not mean we cannot invest in the stock, we should look for interest coverage ratio which tells us how the company is placed to service its debt. If interest coverage is more than 2 then it means the company can easily serve its debt.

We have shortlisted top 10 companies with the highest D/E ratio along with its interest coverage ratio in the below table: