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Strategies & Market Trends : India Coffee House
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To: Nandu who wrote (8054)10/11/1999 8:08:00 AM
From: Mohan Marette  Read Replies (2) of 12475
 
Ref: P/E of Indian companies.

Nandu:
Granted the interest rates are relatively high in India than the West and that certainly it has a dampening effect on the Indian businesses in general, consider also this:

The larger among the lot like the Tatas,the Birlas,the Reliances,the Mahindras, the Oberois,the Ranbaxys.the Iyengars, etc have access to cheaper funds overseas if needed.

The interest expense, if any, is already accounted for in the Income Statement as an expense item therefore it is already discounted.

There some companies who rely on internally generated cash for expansion and other related activities thus bypassing external sources (domestic debt market) of funding thereby avoiding high cost funds altogether.

So the P/E of at least some companies who rely on funds raised from domestic debt markets for their business activities should benefit considerably if and when the interest rates come down (a distant possibility certainly) thus helping their P/Es further, all other conditions being equal of course.
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