India Inc’s credit upgrades surge in H1FY25 on favourable biz environment | Company News
Backed by conducive business and economic conditions, the number of credit rating upgrades surpassed the number of downgrades by a higher proportion for Indian corporates in the first half ended September 2024 (H1’FY25). The outlook for corporate credit quality in the second half also remains robust, said rating agencies.
While exuding confidence in the strength of India Inc’s credit quality, the rating agencies remained watchful of some sectors, especially export-intensive ones, due to risks from global geopolitical and geoeconomic factors.
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CRISIL Ratings, in a statement, said there were 506 upgrades and 184 downgrades in its rating universe. The ratings credit ratio, or the proportion of rating upgrades to downgrades, increased to 2.75 times in H1’FY25 from 1.79 times in the second half of the last financial year (H2’FY24).
CareEdge Ratings said, overall, there were 215 upgrades and 133 downgrades across sectors in the first half of FY25, with export-oriented sectors like textiles and chemicals experiencing higher downgrades.
Suparna Banerji, associate director at India Ratings, said, “Upgrades were seen across sectors. The government’s push on investments continued to support sectors such as infrastructure, construction, and capital goods, which witnessed a high number of upgrades.”
“Downgrades were seen primarily in sectors impacted by volatile raw material prices or uncertain export demand, such as textiles, or were due to individual issuer-specific stress, such as in services or capital goods,” Banerji added.
The economic and business conditions are expected to remain conducive in the busy season, which starts from October 2024 and runs until March 2025. Somasekhar Vemuri, senior director, CRISIL Ratings, said, “The positive credit quality outlook on India Inc is largely led by government infrastructure investment and private consumption, also reflected in the healthy GDP growth expected this financial year. Particularly, the expected decline in interest rates will support domestic demand as inflationary pressures subside.”
Seconding Vemuri’s assessment, Sachin Gupta, executive director and chief rating officer at CareEdge Ratings, said, “Looking ahead, the upcoming festive season, with its potential for increased rural demand and consumer spending, could enhance the credit profile in the second half of FY25.”
Striking a note of caution for the days ahead, K Ravichandran, chief rating officer at ICRA, said, “There are some emerging pockets of concern, such as an expansion in household debt and growth in unsecured lending, with early signs of rising delinquencies in unsecured retail and microfinance segments. Also, some export-dependent sectors, namely chemicals and cut & polished diamonds, continue to face demand and profitability challenges.”
Despite positive signs, global challenges persist. Weak export demand, the economic slowdown in China, elevated freight costs—particularly due to the Red Sea crisis—and ongoing geopolitical risks continue to pose downside risks, said Gupta of CareEdge.
First Published: Oct 01 2024 | 7:25 PM IST
