The aggregate debt to aggregate networth of top ten companies, including R-ADAG, Vedanta, Essar, Adani and Jaypee, at 1.93 times is well within the respected level of two times, according to a study by the State Bank of India’s Economic & Statistical Research Department.

The SBI’s economic research team came to this conclusion after studying the top 10 companies, including R-ADAG, Vedanta, Essar, Adani and Jaypee, that Credit Suisse flagged as being most indebted in its report ‘House of Debt’.

The debt to aggregate networth ratio is a measure of a company’s financial risk. A company is considered to be on a solid footing when this ratio is lower.

The spectre of indebtedness among India’s top conglomerates raised by Credit Suisse, a global private bank and wealth manager, may be misleading, said the SBI study.

In its report entitled “Hidden Treasures in ‘House of Debt’”, SBI observed that the number crunching report from ‘a reputed house’ focused more on interest cover and the debt servicing ratios of top 10 Indian companies to drive home the extent of corporate indebtedness.

“However, this in itself is misleading as what is more important at the end of day is the networth, cash in hand, yearly accretion to networth, investments, market value of assets and unbundling of value of some of their subsidiaries thus overall defining their repayment capacity,” it said.

On this count, the SBI report said, one may always look at the overall debt to networth and debt to market capitalisation of such companies.

Its estimates show that on aggregate basis such top ten companies ratios stands at 1.93 times and 1.88 times, respectively, which is well within respected level of two times.

Some of the unlisted entities within each of the groups, which also include JSW, GMR, Lanco, Videocon and GVK, may also unlock value through listing at a later date, the report added.

The (Credit Suisse) report does not compare international (non-Indian) companies on the basis of debt to networth and their credit rating, SBI said.

“Also, in our study, we have reckoned the book value of networth and not the revalued networth. The focus of the said (Credit Suisse) research report appears to be more on operating profits when the global slowdown has affected some of best international companies as well. However, networth also needs to be factored during lean times,” the bank said.

The combined borrowings of the top 10 corporates has been pegged at ₹7,33,542 crore by Credit Suisse.

The SBI report said the aggregate group networth (in 2015) and aggregate market capitalisation (as of May 4, 2016) was at ₹3,80,126 crore and ₹3,90,392 crore, respectively.

The debt to market capitalisation ratio on an aggregate basis of the top ten companies stands at 1.88 times, which is well within respected level of two times.

This ratio gives an idea as to how indebted a company is relative to its market value.