rating agencies CRISIL And execution Both reported better credit ratios than last year. While Crisil said credit system In the first half of FY2023, an improvement of 5.52 times from 5.04 times in the previous fiscal, ICRA recorded a credit ratio of 3.3 times from 2.8 times last year. Credit Ratio Rating is the ratio of upgrade vs downgrade and gives an idea of the credit profile of the companies. Rating agencies analyze credit ratios twice a year.
Crisil said about 80% of its rating remained unchanged in the first half of the financial year, but the rate of upgrade increased to 16.70% from about 14% in the second half of the last fiscal and about 3% two years ago. On the other hand the downgrade rate was flat at 3.02%.
“About 35% of all upgrades were from the infrastructure sector (including large Immovable property Players)… driven by improved operating cash flow, completion of important project milestones and equity infusion. Increase in the share of central counterparties over the years basic The projects have led to more predictable payment cycles which provide added convenience to credit quality,” said Gurpreet Chhatwal, MD, Crisil Ratings.
In all, CRISIL made 569 upgrades and 103 downgrades during this period.
ICRA upgraded 18% of its portfolio entities in the first half of the fiscal, significantly higher than the 10-year average of 11%. The downgrade at 5% remained below the 5-year average of 12% at less than the 10-year average of 9%.
The real estate, textile, financial, engineering, construction and road sectors accounted for nearly half of the total upgrades by ICRA in the first half of FY2023, while accounting for a third of ICRA’s rated portfolio.
“The decline in business, limited capital expenditure and therefore a moratorium on fresh term borrowings, and an organic reduction in existing balance sheet debt have kept incremental downside credit risk low,” ICRA said.
ICRA recorded 250 upgrades and 76 downgrades. There were only five defaults in ICRA’s portfolio in the semi-financial, as compared to 42 in FY2022 and 44 in FY2021, four out of five defaults were from non-investment grade.
CRISIL expects the trend of delivering to continue this fiscal with the average gearing to touch a decade low of less than 0.5x. Crisil said that though some sectors are facing challenges such as high cost of living and rising interest rates, a strong balance sheet is expected to keep India Inc well positioned, even as global uncertainty persists, Crisil said. .
“A significant hardening of interest rates, however, is a risk factor that will affect discretionary spending, make debt less affordable, and stifle capex. In addition, a rise in geopolitical conflicts, a global recession and global Fund flows (inter-related, not isolated factors) will challenge India’s macroeconomic fundamentals, albeit not as much with respect to other economies. These factors will directly or indirectly impact credit quality trendlines, looking ahead ,” said K Ravichandran, chief rating officer at Icra.
ICRA has a negative outlook on airlines, media and entertainment (exhibitors and print), and a positive outlook on electricity (thermal and distribution) and oil and gas (upstream) and roads (tolls).