of Indian companies improves in 2H22: Rating

Credit quality of Indian corporates improved significantly in 2H22. Still, input prices and the cancellation of pandemic-related relief measures could weigh on the new year, the agency said on Friday.

CRISIL Ratings, which a large number of financial sector entities, reported that the credit ratio (the number of upgrades to downgrades) in the second half of the fiscal year improved to half of 5.04 times fiscal, from 2.96% in the first fiscal year.

It attributed the improvement to a continued in demand, which lifted revenues in most industries to pre-pandemic levels, and aggressive government relief measures to cushion the blow from the pandemic.

The agency gave a “positive” outlook for credit quality and expects more upward revisions than downward revisions in FY23.

However, on input prices as commodity prices pushed up after ’s invasion of Ukraine, and a possible withdrawal of pandemic-related relief measures could also ease credit ratios.

“Demand recovery, flexibility in supply chain management and tight control of costs have led to a 41% increase in the upgraded company’s median operating profit over the past two fiscal — more than double the growth rate of the portfolio,” it said. President Chief Rating Officer Subodh Rai said.

Meanwhile, ICRA said credit quality rebounded in FY22 after the economic slowdown in FY20 and the pandemic left scars in FY21.

It said the downgrades of 184 entities reduced the downgrade rate to just 6%, compared with the ten-year average of 9%, while the upgrade rate for FY22 was 19% against the backdrop of 561 entity upgrades.

See also  Netflix plans to expand game catalog to include more than 50 games by year's end: report

ICRA said the tourism, hospitality and restaurant industry had the lowest credit ratio at 0.4, while the ferrous metal industry had the highest credit ratio at 16.

India’s rating agency called FY22 a surprising year of “remarkable recovery”. Its downgrade-to-upgrade ratio is at a decade low of 0.3, marking a reversal of a three-year trend of downgrades outpacing upgrades.

The agency said it upgraded 276 companies, or 23% of its rating portfolio, in FY22, while only 86 had to be downgraded.

It expects the pace of rating upgrades to slow in FY23. Profit margins of Indian companies are also likely to contract as the Russian war continues. Still, the agency’s outlook is seen as “stable” across industries as the company is able to withstand the pressure.

(This story was unedited by NDTV staff and was automatically generated from the syndicated feed.)