Debt-straddled companies see salaries take a hit
Reports studied by market research firms have revealed that 'compensation increases' and growth have taken a backseat across firms that are heavily indebted. The study showed that despite cost-cutting measures being adopted by the debt-ridden companies, the effects were more evident across general workers and not owners. The data revealed that promoters' compensation increased 41.57% from 2013, while non-promoters saw an increase of 32.75%
India's top corporate giants are weighed down heavily by massive debts and large expenditures, amidst declining profits. Over the year, India's major companies have been reporting lower profits and dwindling revenues, while their loans and debts balloon over time. Data obtained earlier this year sees the top 500 publicly traded companies in India have a debt-to-equity ratio of 126%, with poor debt-servicing abilities.
"Debt for these groups is still "standard" in books of the banks. The rising intensity of stress for these borrowers and downgrades from rating agencies increase the possibilities of these slipping to NPLs (non-performing loans)," reports said.
Certain sectors in India, such as information technology, healthcare, consumption and retails have remained steady in terms of debt. These sectors scripted better earnings for their employees, as heavy debt burden was not felt. Indebted sectors such as power, energy, metal, and real estate have seen declining growth over the last few months, forcing them to take on heavy debts and lower employee compensation.
In the wake of poor industry conditions across certain sectors and ballooning debts, companies are forced to cut costs to improve efficiency and profitability. This often results in employees taking the brunt of the cost-cutting measures and companies resort to offering incentive packages and stock options to retain strong performers. Workers are often provided benefits and non-monetary perks as an alternate to higher salaries.