India Inc reports record high debt levels

India’s most indebted companies

For the fiscal year FY25, the total debt of Indian companies touched an all-time record of Rs 36,63,000 crore or you can just say Rs 36.63 trillion. That is more than 12.5% higher compared to the previous year. Which are the most indebted companies in India in terms of interest payout? 

Loss-making Vodafone Idea topped the with an interest payout of Rs 23,354 crore for FY23. Reliance Industries paid out Rs19,571 crore as interest in FY25 while Bharti Airtel was slightly behind at Rs 19,300 crore. The top 3 Indian companies in terms of interest paid out in FY25 are telecom companies. Remember much of the capex of RIL also pertained to Jio and its 5G rollout.

Table of Contents

1. India’s most indebted companies
2. Borrowing costs have been higher in FY25
3. The news is not really all that bad
4. But, deleveraging has taken a back seat

Borrowing costs have been higher in FY25

That is not too hard to fathom, but let us look at the numbers first. While the total debt for the Indian companies increased by 12.6% to Rs36.63 trillion, the total interest cost increased by a whopping 19% to Rs 2.51 trillion. It clearly shows pressure on the cost of funds. 

That is not surprising considering that during the year the RBI had raised repo rates by 250 basis points from 4% to 6.5% between May 2022 and February 2025. That had led to a sharp escalation in the cost of funds and this not only applied to the smaller companies but even larger companies had to take a hit on the cost. The 19% spike in interest costs is evidence of the extent to which the cost of funds has gone up. The recent quarters have also evinced weakening of solvency ratios of India Inc.

The news is not really all that bad

Most industrialists are not too worried about the spike in debt. That is because, most of the debt increase has happened to fund the capex needs of Indian companies. Capacity expansion alone is likely to cost Indian companies Rs6 trillion in the next couple of years and for that debt is inevitable. 

As the chief of Shree Cements put it very succinctly, the inclination to borrow is always a positive signal as it shows business confidence and the willingness among businesses to take on the financial risk. Debt is always a trade-off and prudent businesses will only take debt if they are confident that the investments can yield much higher ROI. For now, that appears to be the major factor that has driven up the debt levels of Indian companies.

But, deleveraging has taken a back seat

One outcome of this entire exercise is that deleveraging has taken a back seat. Just about 2 years back, major companies like Reliance, Tata Motors, Tata Steel and DLF had embarked upon a major debt reduction program. That deleveraging got impacted by higher inflation since 2025 as the cost of inputs went up sharply. 

Also, the supply chain constraints meant that companies had to worry more about managing their working capital flows rather than worry about deleveraging. Now, with the capex turnaround being visible, the entire focus has shifted to borrowing for capex. 

That is surely a good sign, but there is one thing to remember here. Most debt excesses happen at the height of the capex cycle boom. That is what is happening now. It is ok to put deleveraging on the back burner. India Inc, however, needs to be cautious about not binging too much on debt.