Red Alert: Know which debt-laden company you should invest in

The Bhushan Steel incident reminds us that good days aren’t here yet, at least, not for all companies. Buying into some of the high-debt companies with a sizeable portion of the promoters’ shares pledged could be a risky bet. All these companies have debt to EBIDTA of above-industry average and promoters’ pledged free holding is less than 25% of total shares.
However, reversal in earnings growth and reduction in promoters’ shares pledged could be a positive and result in strong returns for investors. For instance, India Cements could benefit from the reversal in the investment cycle.