'Credit quality of India Inc improves'

MUMBAI: The Crisil Ratings credit ratio (upgrades to downgrades) scaled to 1.33 in the second half of fiscal 2021 - with upgrades and downgrades at 294 and 221, respectively - from a decadal low of 0.54 in the previous half, as demand recovery strengthened and GDP growth returned to positive territory in the third quarter. The debt- weighted credit ratio too increased to 1.26 from 0.52.

The impetus to infrastructure development in Union Budget 2021-22, steady farm performance and sustained rural demand, together with rollout of vaccination, hold promise for continued improvement in the credit quality of India Inc even as the spectre of a second wave of Covid-19 infections looms large, the ratings agency said in a report.

There were fewer downgrades across the spectrum in the second half despite the sunset of policy and regulatory measures such as the debt servicing moratorium in August and relaxation of default recognition norms in December 2020. These had provided temporary relief at the peak of the lockdown.

The emergency credit line guarantee scheme (ECLGS) provided much-needed liquidity support to jump-start business activity in the second half of the fiscal. But the biggest driver for the increase in credit ratio were the unlock measures, which released pent-up demand across sectors, kick-started the economy and got cash flow from operations flowing for India Inc., Crisil said.

Moderately resilient sectors such as automotive components and packaging saw a sharp increase in credit ratio led by increased pace of upgrades, even as credit ratio for the moderate resilient category was below 1.

Highly resilient sectors such as pharmaceuticals and agrochemicals had performed well and maintained credit ratio above 1 even during the worst phase of the pandemic, backed by sustained demand. Low-resilience sectors such as hospitality and real estate developers continue to see more downgrades than upgrades, even as the pace of downgrades slowed in the second half. (IANS)

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