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HDFC Bank Ltd (NYSE:HDB)
Interest Coverage
0.64 (As of Sep. 2014)

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company’s Operating Income (EBIT) by its Interest Expense. HDFC Bank Ltd's Operating Income for the three months ended in Sep. 2014 was $667 Mil. HDFC Bank Ltd's Interest Expense for the three months ended in Sep. 2014 was $-1,041 Mil. HDFC Bank Ltd's interest coverage for the quarter that ended in Sep. 2014 was 0.64. The higher the ratio, the stronger the company’s financial strength is.

Warning Sign:

Ben Graham prefers companies interest coverage is at least 5. HDFC Bank Ltds earnings cannot cover its interest expense. If the situation continues, the company may have to issue more debt.

HDB' s 10-Year Interest Coverage Range
Min: 0.27   Max: 0.74
Current: 0.53

0.27
0.74

During the past 13 years, the highest interest coverage of HDFC Bank Ltd was 0.74. The lowest was 0.27. And the median was 0.49.

HDB's Interest Coverageis ranked higher than
55% of the 1837 Companies
in the Global Banks - Regional - Asia industry.

( Industry Median: 1.30 vs. HDB: 0.53 )

Definition

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company’s Operating Income (EBIT) by its Interest Expense:

If Interest Expense is negative and Operating Income is positive, then

Interest Coverage=-1*Operating Income/Interest Expense

Else if Interest Expense is negative and Operating Income is negative, then

HDFC Bank Ltd did not have earnings to cover the interest expense.

Else if Interest Expense is 0 and Long-Term Debt is 0, or Interest Expense is positive, then

HDFC Bank Ltd had no debt.

HDFC Bank Ltd's Interest Coverage for the fiscal year that ended in Mar. 2014 is calculated as

Here, for the fiscal year that ended in Mar. 2014, HDFC Bank Ltd's Interest Expense was $-3,768 Mil. Its Operating Income was $1,998 Mil. And its Long-Term Debt was $6,484 Mil.

Interest Coverage=-1*Operating Income (A: Mar. 2014 )/Interest Expense (A: Mar. 2014 )
=-1*1997.6110783/-3767.78893483
=0.53

HDFC Bank Ltd's Interest Coverage for the quarter that ended in Sep. 2014 is calculated as

Here, for the three months ended in Sep. 2014, HDFC Bank Ltd's Interest Expense was $-1,041 Mil. Its Operating Income was $667 Mil. And its Long-Term Debt was $6,329 Mil.

Interest Coverage=-1*Operating Income (Q: Sep. 2014 )/Interest Expense (Q: Sep. 2014 )
=-1*666.724140196/-1040.54018549
=0.64

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

The higher the ratio, the stronger the company’s financial strength is.


Explanation

Ben Graham requires that a company has a minimum interest coverage of 5 with the companies he invested. If the interest coverage is less than 2, the company is burdened by debt. Any business slow or recession may drag the company into a situation where it cannot pay the interest on its debt.

Interest Coverage is an important factor when GuruFocus ranks a company’s overage financial strength.


Related Terms

Operating Income, Interest Expense, Financial Strength


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

HDFC Bank Ltd Annual Data

Mar05Mar06Mar07Mar08Mar09Mar10Mar11Mar12Mar13Mar14
interest_coverage 0.74At Loss0.490.400.270.480.670.490.470.53

HDFC Bank Ltd Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
interest_coverage 0.590.560.640.130.630.600.650.260.640.64
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