Barely 1% of investment-grade firms keen on RBI's loan recast 2.0: Crisil

Of those inclined to seek restructuring, 95% are sub-investment grade; Crisil qualified views by saying these are preliminary readings from its survey

Hardly any investment-grade companies are showing interest in restructuring their debt under the resolution framework 2.0 of the Reserve Bank of India, Crisil said on Thursday, as demand conditions improve with a pickup in economic activities after the passing of the second wave.

Based on a preliminary analysis of 4,700 eligible companies that it rates, the rating agency said, “barely 1% of eligible companies in the portfolio of CRISIL Ratings have opted for, or are contemplating, the debt restructuring facility offered by the RBI,” under its second restructuring package.

Of those opting for, or are inclined to seek restructuring, 95 per cent belong to the sub-investment grade rating category. “Put another way, investment-grade rated corporates are showing high resilience,” the rating agency said.

Crisil qualified the statement by stating these were “preliminary readings” from its survey, and might not be reflective of the actual intention of companies, especially those non-rated micros and small enterprises in India.

The RBI announced the scheme during its monetary policy review on May 5. The scheme was available for individuals, small businesses, and micro, small and medium enterprises (MSMEs) with aggregate exposure of up to Rs 25 crore provided they had not availed of benefits under any of the earlier restructuring frameworks, including the resolution framework 1.0 announced on August 6, 2020. The precondition of the scheme was that the accounts were supposed to remain standard as of March 31, 2021.

The RBI subsequently raised the aggregate debt threshold to Rs 50 crore from Rs 25 crore.  

“The quick recovery in demand after moderation during the second Covid-19 wave, and sanguinity around economic growth have led corporates to give the restructuring option a miss,” said Subodh Rai, Chief Ratings Officer, CRISIL.

The rating agency said its investment-grade rated corporates have shown “strong resilience amid the pandemic and hardly anyone is planning to avail restructuring 2.0.”

Of the companies that are showing interest in the restructuring schemes, four out of five of them are rated “B or lower”, which clearly indicated that “only companies with weak credit quality are exploring restructuring.”

According to Nitin Kansal, Director, of CRISIL, most of the companies opting for or thinking of restructuring belonged to the low-to-medium resilience sectors such as hospitality, educational services, textiles, construction and gems and jewellery.  

“Demand recovery in some of these remains uncertain because of the continuing overhang of the pandemic,” Kansal said.

The rating agency warned that any weakening of sentiment around recovery, and a likely third wave leading to fresh curbs on economic activity, will influence more companies to seek restructuring 2.0.

The deadline for availing of the restructuring ends on September 30.