DSCR sensitivity analysis
See what happens to repayment cover if sales and margins come in below the projections. Enter five years of figures in ₹ lakh and the stress you want to test.
Lowest DSCR after the stress
| Yr 1 | Yr 2 | Yr 3 | Yr 4 | Yr 5 |
|---|
Revised EBITDA = Sales × sales achieved % × (EBITDA margin × margin achieved %). DSCR = EBITDA ÷ (Interest + Principal repayment). Revised PBT = Revised EBITDA − Interest − Depreciation; tax applies only to a profit.
This calculator is for learning. Banks apply their own policies, margins and benchmarks, so treat the result as a guide, not a credit decision.
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Why banks stress-test projections
Projections are a borrower's best estimate, and estimates go wrong. Before sanctioning a term loan, a credit manager asks: if sales fall short and margins shrink, can the borrower still repay? A sensitivity analysis answers that by re-working the numbers with lower sales and margins and checking the DSCR in each year.
A project whose DSCR stays above 1 even under stress is far safer than one that only works if everything goes to plan.
How to use this calculator
- Enter five years of projected sales, EBITDA, interest, depreciation and principal repayment.
- Enter the stress: sales achieved as a % of projection, and EBITDA margin achieved as a % of the projected margin. 90% and 90% is a common test.
- Enter the tax rate.
The formulas
- Revised sales = Sales × sales achieved %
- Revised EBITDA margin = Projected margin × margin achieved %
- Revised EBITDA = Revised sales × Revised margin
- DSCR = EBITDA ÷ (Interest + Principal repayment)
- Revised PBT = Revised EBITDA − Interest − Depreciation; tax applies only to a profit
This DSCR uses EBITDA, the cash from operations before tax. The DSCR calculator uses the other common form, (PAT + Depreciation + Interest) ÷ (Interest + Principal). Use the one your bank uses.
Worked example
In the example loaded, the projected DSCR rises from 1.04 in year 1 to 2.25 in year 5. With sales at 90% and margins at 90%:
- Year 1 EBITDA falls from ₹25 lakh to ₹20.25 lakh and the DSCR drops to 0.84: the first year's repayment isn't covered.
- From year 2 onwards the DSCR stays above 1, reaching 1.82 in year 5.
A bank would look at a moratorium, a lower first-year repayment or more promoter margin to protect year 1.
Frequently asked questions
What stress do banks apply? Commonly a 5–10% fall in sales or margins, or a rise in interest rates or raw material costs. The right test is the risk most likely for that business.
Is a high average DSCR enough? No. The weakest year matters most, because one bad year can cause a default even if later years are strong.
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