It is believed that the financial health of Indian companies is not as vulnerable as that of their Western counterparts. But on certain parameters they fail to feature favourably even when compared to the subprime crisis era. Take interest coverage ratio -a measure of a company's ability to pay interest on outstanding debt, for instance. As per data from Mint, for the 3,500 companies listed on BSE, this ratio has dropped from 5.9 times in December 2007 to 2.7 times in the quarter ended December 2012. Plus the deterioration has been for stocks across market caps. For mid and small cap stocks in fact, the interest coverage ratios have been lower for about seven-eight quarters now. Investors therefore need to be rather watchful about the debt and cash flow position of companies.
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