The great Indian debt detox: How companies are repairing their financial health

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part 2 of this analysis) is helping them shake off debt, leaving them with healthier balance sheets and more room to take risks. We explain this key finding from our analysis in the third part of the series. Before unveiling India Inc’s loss of appetite for loans, a trip back to 2022-23 is in order.

That year, the total debt of a Mint sample of 416 non-financial companies in the BSE 500 had shot up 9.3%, after rising about 2% in the previous fiscal. A significant portion of this spurt was due to companies looking to shore up their working capital in a year when their operating profits shrank. Cut to 2023-24.

With commodity prices cooling and inflation easing, the companies in our analysis saw a boost in operating cash flows, which improved their financial health. Their reliance on debt dropped, and as a result total borrowings rose less than 1%, marking the slowest growth in at least seven years. Aditya Jaiswal, assistant vice president, equity strategy, Elara Capital, attributed the muted growth in debt to improved profitability that year.

“It allows companies to rely more on their internal cash flows to fund operations and growth initiatives," he said. The tepid growth in corporate loans was also visible in the declining share of industry in the overall credit given by banks. As of 31 March 2024, industry had a 22.2% share in outstanding credit, down from nearly 25% a year prior, Reserve Bank of India data showed.