DSCR & Financial Health Ratio Diagnostic
Is my Debt Service Coverage Ratio (DSCR) and financial leverage within commercial bank comfort limits?
Financial Inputs
Audited annual net profit after all operational expenses and corporate taxes.
Depreciation and non-cash write-offs added back to determine true operating cash flow.
Total annual interest expense paid on all debt facilities.
Total principal debt installments due over the next 12 months.
Sum of all bank debts, trade creditors, and other balance sheet liabilities.
Paid-up share capital + free reserves - revaluation reserves & intangible assets.
Debt Service Coverage Ratio (DSCR)
Your Debt Service Coverage Ratio (DSCR) stands at 1.57x (Strong Institutional Profile).
Institutional Credit Profile
Strong Institutional Profile
Cash Available for Debt Service (CADS)
₹4.70 Cr
Total Annual Debt Servicing
₹3.00 Cr
TOL / TNW Leverage Ratio
2.00x
Key Financial Takeaways
- Your Debt Service Coverage Ratio (DSCR) stands at 1.57x (Strong Institutional Profile).
- The business generates approximately ₹470 Lakh in annual operating cash flows to service ₹300 Lakh in total debt obligations.
- Operating earnings cover annual interest commitments by 3.08 times.
Worked Case Study & Financial Impact
Worked Practical Example:
With PAT of ₹2.50 Cr, Depreciation of ₹1.00 Cr, and Interest of ₹1.20 Cr: CADS is ₹4.70 Cr. Scheduled principal repayments are ₹1.80 Cr + Interest ₹1.20 Cr = ₹3.00 Cr debt service. DSCR = 4.70 / 3.00 = 1.57x (Comfortable). TOL/TNW is 9.00 / 4.50 = 2.0x (Well within 3.0x ceiling).
Strategic Credit Meaning:
DSCR is the single most critical ratio scrutinized by bank credit committees. A DSCR below 1.25x triggers covenant restrictions, higher interest spreads, or rejection of term debt proposals.
Variables Influencing Your Credit Sanctions:
- Non-Cash Depreciation: Capital-intensive firms benefit from depreciation add-back, bolstering cash available for debt service.
- Bullet Repayments: Structuring balloon or bullet amortizations lowers annual debt service, improving DSCR during initial years.
- Subordinated Debt: Quasi-equity or subordinated unsecured promoter debt can be added to net worth, reducing TOL/TNW.
Frequently Asked Questions
What is considered a good DSCR for bank financing in India?
Indian commercial banks generally consider a DSCR of 1.25x as the minimum acceptable threshold. A DSCR of 1.50x to 2.00x is considered strong and commands preferential borrowing rates.
Why is interest added back to PAT in the DSCR numerator?
Because PAT is arrived at after already deducting interest expense as a P&L line item. To measure the total cash available before debt servicing, interest must be added back.
What happens if our DSCR is below 1.20x?
When DSCR falls below 1.20x, lenders usually request tenure elongation (spreading repayments over 7-10 years instead of 5) or require promoters to inject additional equity to reduce debt principal.
Related Financial Calculators
View All Tools →Calculators on this platform provide indicative mathematical estimations based on industry-standard financial appraisal models (including Tandon Committee Method II, Nayak Turnover Method, and standard compound amortisation).
They do not constitute a formal facility sanction, credit commitment, or legal advisory from SME PAISA or any partner banking/NBFC institution. Final terms, interest margins, security stipulations, and credit sanctions remain strictly subject to formal credit appraisal, audited balance sheet verification, CMA Data assessment, and risk committee approval by institutional lenders.
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