New Delhi [India], June 26 : Debt growth of Indian companies have slowed down over the past five years, suggesting that they are using internal accruals for growth, noted a research report by Bank of Baroda.
The report showed that the debt of non-financial corporates rose from Rs 20.7 lakh crore in FY21 to Rs 22.6 lakh crore in FY25. This reflects a compound annual growth rate (CAGR) of 2.9 per cent, which is significantly lower than the 8.7 per cent CAGR recorded during the previous five-year period between FY15 and FY20.
The report stated, "Growth in debt in the five years ending FY25 was slower than that in the preceding five-year period".
The report also noted that the trend in debt growth has varied across the five-year period. Debt grew by 5.9 per cent in FY21 and 5.7 per cent in FY23.
However, growth slowed to 1.4 per cent in FY22, and there was even a decline of 0.7 per cent in FY24. The fall in FY24 is linked to deleveraging, where companies repaid loans and reduced their debt burden.
This trend indicates that companies have likely turned to internal resources for financing rather than depending heavily on external borrowings.
Despite slower debt growth, investment in fixed assets was higher during this period. This suggests that part of the funding for asset creation came from internal accruals.
The report also showed a sectoral breakdown, highlighting that power, crude oil, telecom, and infrastructure-related sectors continue to hold a major share in the overall corporate debt.
Out of 25 sectors analysed, 13 recorded a higher CAGR than the overall average of 2.9 per cent during the FY20-FY25 period.
Among key sectors, telecom, power, and infrastructure-related industries witnessed notable momentum in debt levels. This aligns with improved order inflows and increased government capital spending aimed at reviving the investment cycle.
The report also analysed the elasticity of debt to Gross Value Added (GVA), excluding agriculture, financial services, real estate, professional services, and public administration.
This relationship appears to have weakened in the post-FY20 phase, reinforcing the trend that companies may be relying more on their own funds for expansion.
The report outlined that the Indian companies appear to be more cautious in leveraging debt, opting instead to use internal accruals for funding, especially in a changing economic environment.