India Inc's improving credit profile sees more upgrades in H2 of FY24
Upgrades continued to exceed downgrades during the October-March rating reviews of Indian companies despite a rise in borrowing costs and supply constraints caused by the war in West Asia and the Red Sea crisis.
Domestic consumption, demand across several sectors, government spending on public infrastructure, and healthy balance sheets helped in improving credit profiles, rating agencies said. Major rating companies have recorded more upgrades than downgrades, although the pace moderated sequentially.
The ratio of upgrades to downgrades, is stabilising at pre-Covid levels. For Crisil, the largest rating company, the ratio improved to 1.79 during October- March of 2023-24, compared with 0.77 in October-March of 2019-20. It was 1.21 in the first half of FY20, before the onset of the pandemic.
The ratio for other major rating agencies was above one, although there was a sequential decline, likely due to the base effect. For ICRA, the number of instances of defaults dipped to 5 in FY24, compared with 22 in FY23 and 42 in FY22.
«Corporate India's performance in FY24 remained on track, with upgrades continuing to outpace downgrades significantly» said Arvind Rao, head of the credit policy group at India Ratings.
Upgrades were driven by sectors such as roads, renewables, construction, auto components, hospitality and education. Export-oriented sectors such as textiles and marine exports saw more downgrades because of global headwinds.
«Pressures on operating margins are the primary reasons for downgrades,» said
