Thursday, September 23, 2021

India Inc credit outlook turns positive: CRISIL Ratings

The credit rating agency, CRISIL on Wednesday, August 18, 2021, upgraded India Inc’s credit quality outlook for FY22 from “cautiously optimistic” to “positive”, based on continued improvement in demand. This comes after the setbacks caused by the second wave of the Coronavirus pandemic in Q1 of FY22.

“Increasing vaccination coverage should also reduce the impact of the third wave if it comes,” CRISIL said in a statement.

28 sectors to be at a pre-pandemic level by the end of FY22

A CRISIL rating study of 43 sectors shows that the current recovery is broad-based. By the end of this fiscal, 28 sectors are on course to see a 100 per cent rebound in demand to pre-pandemic levels, while 6 will see upwards of 85 per cent.

CRISIL Ratings Chief Rating Officer Subodh Rai said the outlook revision factor in strong economic growth, both domestic and global, and containment measures that are localised and less stringent compared with the first wave. This should sustain the pick-up in domestic demand even if the third wave hits. “We believe that India Inc is on a high and strong footing,” he said.

Credit ratio improved 2.5 times

The credit ratio (upgrade to downgrade) improved 2.5 times in the first four months of the current financial year. It touched a decade low of 0.54 times amid the first wave in the first half of FY21, before recovering to 1.33 times in the second half, CRISIL said in a statement.

Sectoral Growth

Among the sectors with the highest rating upgrades, construction and engineering, and renewable energy benefited from the government’s emphasis on infrastructure spending. Steel and other metals gained from higher price realizations and profitability.

Pharmaceuticals and speciality chemicals continued to see a boom, supported by both domestic and export growth. But contact-intensive sectors such as hospitality and education services are bearing the brunt of the COVID-19 pandemic and have declined more than upgrades.

To be sure, targeted relief measures by the Reserve Bank of India (RBI) and the government have cushioned the credit profile in some sectors amid the second wave, the CRISIL said.

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