In the end, FY14 was another forgettable year for India Inc, a year in which profits grew in single digits—9.56%—the benefits of a weaker rupee washed away by waning consumer demand and the near lack of capital expenditure in an insipid economic environment. Industry had little choice but to sit it out on the sidelines as an ineffective government failed to resolve supply-side bottlenecks—power plants remained starved for coal or gas while steel plants ground to a halt without iron ore to feed them.
Much of India Inc remained leveraged to the hilt, having borrowed heavily during the boom years of 2009 to 2011 to either put up more capacity or to acquire assets; with many of these assets not operating at optimal levels thanks to the acute shortage of raw materials, cash flows were strained and unable to match loan commitments, compelling companies to seek easier repayment terms from lenders. How close many of them were to defaulting on interest payments to banks was evident from the fact that lenders restructured a record R1 lakh crore of loans last year, on the back of R75,000 crore recast in FY13.
If the top line for a sample of 2,144 firms (excluding banks, financials and OMCs) increased by 9.42%, some of it was due to the performance of the overseas subsidiaries of Indian companies—a JLR for instance. In the home market, demand all but collapsed: auto sales were at their lowest in a decade as commercial vehicle volumes plummeted leaving unutilised fleet capacity at its highest levels in history. Discretionary spends remained on a leash—volumes at Bajaj Auto fell 8.7% in FY14, while revenues of capital goods makers such as BHEL saw a sharp fall of 19%. At the end of March 2014, BHEL’s order backlog at R1.01 lakh crore, was smaller by 11.4% than it was at the end of March 2013, indicating both lacklustre demand and heightened competition. If Larsen & Toubro’s order book looked a lot healthier at R1.63 lakh crore, up 13%, it was thanks to a few wins from overseas markets. Given balance sheets remain weighed down by debt—consolidated debt at Jaiprakash Associates is still a high R60,000 crore while at Adani Enterprises, it is R68,000 crore—it could be a while before corporates consider making fresh investments. The recent rally in the stock markets might help restore debt-equity ratios to saner levels but for India Inc to commit