Zenith Steel Pipes & Industries Limited — financial distress indicators

Total liabilities are 2.62× total assets.

Balance-sheet insolvency test: debts exceeding the fair value of assets is the statutory definition of net-worth erosion; under the Companies Act 2013 it is a recognised sign of financial sickness.

Interest coverage (EBIT / interest) is -7.33×.

When EBIT < interest, debt service is funded from cash reserves or new borrowing — the classic precursor to payment default and covenant breach.

Merton distance-to-default -0.02 σ → PD 51%.

Structural (Merton/KMV) model: equity is a call option on assets; low distance-to-default means assets are close to the default point.

Current ratio is 0.23 (current assets cover 23% of near-term obligations).

Cash-flow insolvency test: inability to pay debts as they fall due is the trigger for both U.S. involuntary petitions and Indian IBC default.

Revenue changed -55% year over year.

A >30% sales drop typically breaches leverage covenants and starves fixed-cost coverage.

Total debt is 24.9× EBITDA.

Debt above ~6× EBITDA is deep sub-investment-grade territory; refinancing becomes difficult when rates or earnings move against the company.

O-score 14.62 → model probability 100%.

Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.

Short-term debt is 119.9× cash on hand.

Maturity wall: debt due within a year must be refinanced, which is the most common proximate cause of filings.

Operating margin fell from 2% to -34% in two years.

Sharp margin compression signals loss of pricing power or cost control.

Revenue declined every year for three years.

Structural, not cyclical, decline.