Despite more upgrades, corporates not out of the woods yet
Largest domestic rating agency Crisil attributed the higher upgrades both by number of borrowers and quantum of debt to lack of capital expenditure by corporates and also a doubling of money raised through equity markets. Its rival Icra also reported a similar trend, with as many as 646 upgrades against 418 downgrades, but added it may be early to rejoice
There were higher number of rating upgrades than downgrades in the just concluded financial year, but this cannot be extrapolated into an ease of pressures on credit quality that has dominated for over five years, rating agencies said today. Largest domestic rating agency Crisil attributed the higher upgrades both by number of borrowers and quantum of debt to lack of capital expenditure by corporates and also a doubling of money raised through equity markets. Its rival Icra also reported a similar trend, with as many as 646 upgrades against 418 downgrades, but added it may be early to rejoice. "These trends do not imply that the credit quality pressures on India Inc have subsided," the agency, a division of global rating agency Moody's, said.
Crisil, which rates 12,500 corporates, reported 1,402 upgrades and 839 downgrades, resulting in a ratio of 1.67, which is an improvement from last year's 1.22. From a quantum of debt perspective as well, it saw an improvement to 2.31 times in favour of upgrades as against 0.88 times last year. A senior director at Crisil Somasekhar Vemuri said this is the first time in the past seven years that both the credit ratio and the debt-weighted credit ratio have come above 1, but added to establish that the credit pressures have eased, the same trend has to continue for multiple years.
He said there are 3,500 entities which are classified as non-cooperative issuers and the credit ratio would stand at 0.74 times. Most of the non-cooperative issuers are the ones who saw a downgrade, he added. Interestingly, from a debt weight perspective, Icra said total volume of the debt downgraded rose to Rs 2.89 trillion, while the upgraded one was Rs 1.82 trillion, as against Rs 1.69 trillion and Rs 1.55 trillion, respectively, in FY17.
It said a half of downgrades in FY18 came from the financial sector, with 70 per cent of it coming from the state-run lenders. On a sectoral basis, Icra identifies telecom, sugar, healthcare, chemicals and education as the weakest performers, while Crisil puts real estate, thermal power production companies, capital goods and a part of telecom in the weak or fragile category. For Icra, power, autos, media, breweries, petrochemicals and hotels among others were strongest performers, while Crisil said construction and engineering, cement, sugar, pharma and auto were stable.
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