Unlisted firms carry three times the debt of listed counterparts: Motilal Oswal

Listed entities have successfully reduced debt to 13.4 per cent of GDP in FY23 while their unlisted counterparts have witnessed faster debt growth post-COVID, accumulating nearly three times the debt of listed companies, brokerage firm Motilal Oswal pointed out in its latest report.

Despite India's booming equity market and robust economic growth, the financial markets closely mirror the listed corporate sector, leaving questions about the broader economy. The Nifty and Sensex benchmark indices reached record highs of 21,593 and 71,913.07, respectively, in Wednesday's trading session.

The brokerage said that although listed companies have witnessed a two-fold surge in profits over the past three years, aggregate corporate profits have remained stable. This stability signals a deterioration in the financial health of the unlisted sector in the aftermath of the COVID-19 pandemic.

The corporate sector, constituting 40 per cent of India's nominal Gross Value Added (GVA), witnessed listed companies contributing only 30 per cent to corporate GVA and around 11-12 per cent to national GVA. Unlisted corporations, however, overshadow their listed counterparts by more than two times in terms of GVA.

Despite improved profits, listed companies' share in total corporate income taxes has declined post-COVID, with unlisted entities contributing a majority 55-60 per cent of the total corporate taxes.

Meanwhile, the corporate sector, accounting for half of India's total investments, now sees listed companies contributing 35 per cent to corporate capex, up from 25 per cent. This shift signifies that almost two-thirds of corporate capex is now sourced from the unlisted sector.

The financial improvement in the listed sector has come at the expense of the unlisted corporate sector, which plays a crucial role in the Indian economy.

Unlisted entities contribute substantially to aggregate corporate profits, taxes, GVA, corporate capex, and hold a notable three-fourths of corporate debt in India.