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Informist, Tuesday, Oct. 1, 2024
 

MUMBAI – The corporate credit profile saw a robust performance in the six months ended September, with the downgrade-to-upgrade ratio falling to 0.31 against 0.38 in the year-ago period, India Ratings and Research said Tuesday. The ratings agency attributed the reason for the fall in the downgrade-to-upgrade ratio to large corporates seeing sharper improvement in their performance.

During this period, the ratings agency upgraded 202 issuers and downgraded 62. Of the companies reviewed by the agency, the number of defaults also fell to 0.7% against 0.9% a year ago. 

"The downgrade to upgrade ratio continued to be robust, marginally reducing in Apr-Sep. This was against our expectations of continued moderation, as seen in the previous year," Arvind Rao, head of credit policy group at India Ratings, said in a release. "Two major trends contributed to this change. Large corporates were the primary contributors through a higher number of rating upgrades and lower downgrades higher rating categories saw a sharp improvement in their credit profiles," Rao said.

Corporate credit profile remained robust in Apr-Sep despite the median corporate performance showing a marginal weakness, Rao said. "The upgraded large corporates bucked this trend and showed a remarkably sharper improvement in their performance," he added. At the end of September, the rating agency had assigned a stable outlook on 83% of the companies and a positive outlook on 10% of the issuers. The remaining were rated with a negative outlook, the rating agency said. 

In the six months ended September, out of the reviewed portfolios, the highest affirmations were given to financial services, information technology and oil and gas, the rating agency said. "In structured finance, positive rating movements were seen in the transactions supported by adequate build-up of credit enhancement, resulting from significant amortisation of the loan pool since its issuance, lower delinquency and no CE utilisation," the rating agency said. 

"India Ratings expects FY25 to be yet another year where the upgrades will exceed downgrades. The credit drivers remaining robust will help sustain net positive rating actions during 2HFY25 (Oct-Mar)," Saurav Singh, associate director at the ratings agency, said. "The likely softening of interest rates, which are not factored into the ratings, will to an extent counter the marginal deterioration seen in the overall median corporate performance. Any contagion to the domestic economy from a flare up of the ongoing geopolitical issues remains a key monitorable."

Going forward, the ratings agency expects the continued healthy economic growth along with strong balance sheets of corporates to continue to help corporates sustain their improved credit profiles, the company said.  End
 

Reported by Siddhi Chauhan

Edited by Akul Nishant Akhoury

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