Increase in rating upgrades as companies' loan repayment capacity improves

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MUMBAI: The Indian corporate sector is recovering sharply after the Corona epidemic and lockdown, as evidenced by the June quarter rating upgrade-downgrade figures. There has been an increase in the upgrading of companies' credit ratings compared to the rating downgrade in the June quarter.

The trend of credit rating downgrade has taken a U-trend since the onset of the epidemic and the number of companies being upgraded has been much higher. With the issuance of many government relief packages, the operations of companies are becoming smoother and their ability to repay their loans is also improving.

The credit ratio, which reflects the economic recovery of the corporate sector, rose to 3.08 per cent in the June quarter from 1.6 per cent at the end of the March quarter. According to the Price Equity Credit Rating Migration Database, the ratings of 121 companies have been upgraded and the ratings of 20 companies have been downgraded. The database includes data from seven credit rating companies - Aquat, Brickwork, CARE, Crisil, ICRA, India Ratings and InfoMarix.

The number of upgraded companies has been steadily rising since the last June quarter, compared to the credit ratio. At the time, the ratio was 0.2 when 31 companies were upgraded, while 8 companies were downgraded. In the March quarter of this year, the ratio improved to 1.5 per cent. A ratio of less than 1 means that companies are in a worse position overall.

The ratings upgrade in the June quarter was attributed to the Reserve Bank's efforts to support the economy, cuts in spending by the government and other spending by companies, said an official with ratings agency ICRA. Companies have also benefited from the loan restructuring program. It is possible that this is the reason why many companies survived the downgrade.

Power, real estate, pharma and chemical sectors are at the forefront of the upgraded rating of companies in the sector. It may be mentioned that the prices of various commodities and raw materials have skyrocketed, giving a new lease of life to companies in this sector. The measures taken by the government and the Reserve Bank have added Rs 2.5 lakh crore to the liquidity sector.


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