Corporate Credit Quality Rises Horizontally, Say Rating Agency: Report

India Inc’s credit quality improved significantly in the second half of FY22: Rating agency

India’s corporate credit quality showed a sharp improvement in the second half of FY22. Still, high input prices and the withdrawal of pandemic -related aid measures could put pressure on the new year, the rating agency said on Friday.

CRISIL Ratings, which rates a large number of financial sector entities, reported an increase in the credit ratio – the number of upgrades to downgrades – to 5.04 times in the second half of this financial year, from 2.96 percent in the first. half of the fiscal.

It attributed the increase to a continued rebound in demand, which raised incomes of most sectors to pre-pandemic levels and proactive assistance measures by the government that reduced the pandemic blow.

The agency gave a “positive” view of the impending credit quality and expects the increase to offset the downgrade in FY23.

However, the pressure exerted on input prices, courtesy of the commodity price boost following the Russian invasion of Ukraine, and the possible withdrawal of epidemic -related aid measures could also moderate the credit ratio.

“The recovery in demand, agility in managing the supply chain, and tight costs have supported the company’s upgraded median operating profit growth of 41 percent in the past two fiscals – more than double the rate for the portfolio,” its president and chief rating officer Subodh Rai said.

Meanwhile, ICRA said credit quality rebounded in FY22 after the economic slowdown in FY20 and the outbreak affected FY21.

The downgrading of 184 entities lowered the downgrade rate to just 6 per cent, compared to a ten -year average of 9 per cent, while the upgrade rate was 19 per cent in FY22 on the back of the 561 entity rating upgrade, it said.

The tourism, hotel and restaurant sectors had the lowest credit ratios of 0.4, while the ferrous metals sector at 16 was the best, ICRA said.

India Ratings called FY22 a year of surprising “extraordinary recovery”. The downgrade -to -upgrade ratio was at a decade low of 0.3, marking a reversal of a three -year trend in which downgrades outpaced increases.

The agency said it upgraded the ratings of 276 companies in FY22, which represented 23 per cent of its rating portfolio, while only 86 company ratings had to be downgraded.

It expects the rating upgrade rate to moderate in FY23. Indian corporations are also likely to experience a contraction in margins as the Russian war continues. Still, the agency’s survey has been positioned as “stable” across sectors because of the company’s ability to weather stress.

(This story has not been edited by NDTV staff and is automatically generated from a syndicated feed.)


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