India Inc’s credit profile shows strong improvement in the first half of FY22: Report

• Follow

India Inc’s credit profile has showed strong improvement despite severe second Covid wave, with increased upgrades in ratings than downgrades witnessed in the first half of the current fiscal. The ratings upgrade for corporates comes on the back of a sharp and sustained recovery in demand, the ratings agency said. During the first half of FY2022, the three domestic ratings agency, Crisil Ratings, India Ratings and Research, and Icra Ratings brought out reports on performance of their rated companies.

Crisil Ratings saw its credit ratio further climb to 2.96 times, with 488 upgrades and 165 downgrades during the April to September period.

Crisil said with India Inc on a stronger footing, the financial sector is better placed today than it was a year ago. Improving capitalisation levels and provisioning coverage ratios have strengthened the banks’ balance sheets. The outlook on credit quality for the financial sector, especially banks, is stable, it said.

Icra upgrades ratings of 303 entities

During this period, India Ratings and Research upgraded ratings of 150 issuers, and at the same time downgrading the ratings of only 49 issuers. The corporate Downgrade to Upgrade ratio (D-U ratio) was at a low of 0.31:2.1; FY21: 1.4).

India Ratings said, unlike the first wave, business disruptions were limited as corporates remained operational, adapting to the new normal and faced limited supply-side disruptions.

As the performances in FY20 and FY21 was impacted by the pandemic, India ratings used FY19 for comparisons.

Icra Ratings on the other hand, upgraded the ratings of 303 entities which reflected an improvement in the credit profile of 10% of the portfolio entities.

However, the ratings agency said with only 163 instances of downgrades in the first half of FY 2022, the incremental pressure on the credit quality of India Inc, because of weak economic growth and the pandemic seem to have largely subsided.

It said that RBI’s Resolution Framework 2.0 for MSMEs, Emergency Credit Line Guarantee Scheme which are its supportive monetary and fiscal measures are available till the end of FY22 and the central government’s relief package targeting stressed sectors have supported in sustaining the credit profiles.