Improving companies' credit quality outlook

Mumbai: Crisil has revised the credit quality outlook of Indian companies for the current financial year with cautious optimism. The improvement is due to a steady recovery in demand. The upgrade was made by the rating agency following the impact of the second wave of Corona in the first quarter of the current financial year.

Even if a third wave of corona occurs, its impact will be minimal due to the increase in vaccinations, Crisil said in a statement.

Studies conducted in 6 areas have shown that the current recovery is extensive. Apart from the financial sector, these three sectors account for 5 per cent of the outstanding rated debt of Rs 4 trillion.

Demand levels are expected to reach pre-Coro levels by the end of the current financial year in as many as 8 sectors (which account for 4% of outstanding corporate debt), while 8 sectors are poised to reach 8% of pre-Coro levels.

The outlook has improved in view of strong economic growth at home and globally and regulatory measures that are not as stringent in the second wave as in the first.

Even if the third wave comes, domestic demand will remain strong. Indian companies are moving strongly, the report said.

Areas that are showing significant improvement include construction and engineering and renewable energy. This improvement is being seen in view of the high expenditure by the government in the infrastructure sector. In addition, steel and metals companies are benefiting from higher prices.