The company has 630 crore of debt with debt/equity of 2.19. I am trying to understand the management’s response:
The debt that we have on our books is essentially for bill discounting. So, our vendors have a facility where they can take payments and they can discount their bills whenever they want. So, we have a CC limit from the bank, and we use it because we want to be one of the best paymasters in the industry.
Is it a standard practice in the industry? A company taking debt and paying an annual interest to keep their vendors happy? I am sure it affects the financial ratios of the company. Can someone explain how is it working.
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