Singapore: The hype surrounding Prime Minister Narendra Modi’s “Make in India" campaign hits a reality check right at the New Delhi airport. Operator GMR Infrastructure, which also runs power plants, is barely managing to earn an operating profit large enough to make interest payments. Hundreds of other companies, including infrastructure utilities and manufacturers, aren’t that lucky. They’re simply working for creditors.

Modi is asking foreign and local investors to make big-ticket commitments to take advantage of India’s demographics, democracy, demand and deregulation. But the “4Ds" alone may not suffice. For companies that sell to businesses, there’s no path to profit if their customers can’t afford to make new investments.

Right now, they really can’t. Of the 550-odd Indian companies that had at least $100 million in market value four years ago, as many as 123—or more than one in five—are paying more in annual interest on debt than they’re earning before interest, taxes, depreciation and amortization. The median company is more comfortably placed with an Ebitda-to-interest multiple of 3.4, but even this represents a sharp slide in recent years.

The stress on corporate balance sheets would be more manageable if it was concentrated in a few sectors. But the malaise is now quite widespread. At least 12 iron and steel makers and 20 engineering and infrastructure companies are insufficiently profitable to pay interest. Sugar factories like Bajaj Hindusthan and Shree Renuka, the London-traded miner Vedanta Resources, real-estate developers such as Godrej Properties and Orbit Corp. and airlines like SpiceJet and Jet Airways are all in the same boat, according to data compiled by Bloomberg. Companies are struggling to shore up their operational performance, but high interest rates mean they’re fighting with their backs against the wall.

Take GMR, whose shares have lost more than 60% of their value in the past four years. Last week, the infrastructure company reported a record ₹ 1,150 crore in Ebitda for the December quarter. But with interest costs swelling by 22% from the previous three months, GMR still ended up with its seventh straight quarterly loss.

More worryingly, Indian companies seem to fare rather poorly on a regional comparison. Even in China, which has seen a far bigger credit splash, the median company’s debt-repayment capacity is substantially higher than that of its Indian counterpart. Chinese firms have insufficient equity; Indian firms have inadequate profits. It’s this profit problem that Modi needs to fix first before his Make in India slogan becomes a credible sales pitch. Bloomberg

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