Indian corporate credit quality showed marked improvement in the second half of FY22, but high input prices and the withdrawal of pandemic-related relief measures may put pressure in the new year, it said. rating agencies said on Friday.
Crisil Ratings, which rates a large number of entities in the financial sector, reported an improvement in the credit ratio – the number of upgrades to downgrades – to 5.04 times in the second half of this financial year, from 2 96% to the first half of the tax.
He attributed the improvement to a sustained rebound in demand, which lifted incomes in most sectors to pre-pandemic levels and the government’s proactive relief measures which cushioned the blow of the pandemic.
The agency gave a “positive” outlook on credit quality going forward and also expects upgrades to outnumber downgrades in FY23.
However, with pressure on input prices, thanks to a surge in commodity prices following the Russian invasion of Ukraine, and the possibility of a withdrawal of pandemic relief measures may also moderate the credit ratio, he said.
“Recovering demand, agility in supply chain management and cost containment have supported median operating profit growth for upgraded businesses of 41% over the past two fiscal years, more than double the rate of the portfolio”, declared its president and general manager. ratings manager Subodh Rai said.
Meanwhile, Icra said credit quality rebounded in FY22 after the economic downturn in FY20 and the pandemic plagued FY21.
The decommissioning of 184 entities lowered the decommissioning rate to just 6% from a ten-year average of 9%, while the upgrade rate was 19% in FY22 thanks to the upgrade of notes from 561 entities, he said. .
The tourism, hotel and catering sector had the lowest credit ratio at 0.4, while the ferrous metals sector at 16 was the best, Icra said.
India Ratings called FY22 a startling year of “remarkable recovery”, with its downgrades-to-upgrades ratio at a ten-year low of 0.3, marking a reversal of the three-year trend where downgrades have outdated upgrades.
The agency said it upgraded the ratings of 276 companies in FY22, representing 23% of its rated portfolio, while only 86 companies had their ratings downgraded.
He expects the pace of ratings upgrades to moderate in FY23. Indian companies are also expected to see shrinking margins as the war with Russia continues, but the outlook was rated “stable” by the agency across all sectors due to companies’ ability to weather the storm. stress.
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