Credit ratio nears 1 as rating upgrades pick up speed: Crisil

New Delhi, March 8 : A sprightly recovery in demand has spawned guarded optimism about the credit quality of India Inc, and led to CRISIL’s credit ratio (upgrades to downgrades) inching closer to 1 between October and February this fiscal.
These five months saw as many as 244 upgrades compared with 208 for the whole first half. Downgrades continue to be material because the end of moratorium on debt servicing has impacted vulnerable companies, the ratings agency said.
Subodh Rai, Chief Ratings Officer, CRISIL Ratings, said : “The improvement in the credit ratio was driven by more upgrades in moderately resilient sectors such as construction, engineering and electricity generation, which got support from the relaxation of lockdown, revival in demand and higher commodity prices. In comparison, the credit ratio for the first half had fallen to a decadal low of 0.54.” Notably, despite the acute stress faced, the past 11 months saw 55 per cent fewer downgrades to default, on-year. That is primarily because of emergency regulatory and policy support such as loan moratorium, relaxation in default recognition up to December 2020, one-time restructuring relief and emergency credit line guarantee scheme, Crisil said.
The extent of increase in stress among companies and, in turn, for banks and non-banks, will be the monitorable in the road ahead, even as improving demand provides offset, it added.
Highly resilient sectors such as pharmaceuticals and agrochemicals performed well owing to sustained demand. The credit ratio for these sectors remained above 1 even during the bleakest period of the pandemic.