Credit Ratio Moderates To 2.19 As Expected, Amid Global Slowdown, High Inflation: Crisil Ratings
The CRISIL Ratings credit ratio (rating upgrades to downgrades) moderated to 2.19 times in the second half of fiscal 2023 from 5.52 times in the first half of fiscal 2023.
Our Ratings Round-Up report for the first half of fiscal 2023 had presaged this because rising global inflation and the resultant interest rate hikes were expected to temper growth and weigh on the credit ratio.
There were 460 upgrades and 210 downgrades across sectors in the second half.
While the upgrade rate fell ~320 basis points from the first half and stood at 13.46 per cent; however it was still higher than the 10-year average (up to fiscal 2022) of 10 per cent.
Says Gurpreet Chhatwal, Managing Director, CRISIL Ratings, “India Inc’s balance sheets have significantly strengthened and gearing levels continue to be decadal low. The median gearing of the CRISIL Ratings rated portfolio is expected to be ~0.45 time as of fiscal 2024 end, marking a correction from fiscal 2023. This, along with steadfast domestic demand and the government’s unwavering focus on infrastructure spending, has elevated the upgrade rate.”
These reasons will lend a positive bias to the credit quality outlook of India Inc, going forward.
The downgrade rate, on the other hand, has gone up to 6.14 per cent and almost reverted to its 10-year average rate.
“The downgrade rates have started reverting to their long-term averages. Volatile commodity prices have impacted profitability, particularly of micro, small and medium enterprises (MSMEs), while export-oriented sectors face headwinds from a slowdown in their major markets,” said Gurpreet Chhatwal.
