Credit ratio rises to 4x to 2.3 in April-Aug on better corp health: Acuite

Reading also crossed pre-pandemic level of 1.8 in 2019; upgrades more than doubled to 1,380 from 571 and downgrades shrunk by 40.8 per cent from 1,015 in April-August 2020 to 601 in Apr-Aug 2021

Showing signs of improving corporate health, the credit ratio for April-August 2021 moved up sharply to 2.3 from 0.56 in five months of FY21. The reading also crossed the pre-pandemic level of 1.8 in 2019, according to Acuite Ratings.

The upgrades more than doubled to 1,380 from 571 and downgrades shrunk by 40.8 per cent from 1015 in April-August 2020 to 601 in Apr-Aug 2021. The upgrades in 2019 were less in five months at 1,399 and downgrades higher at 1,290.

Besides, Policy support plus steps to provide liquidity, and lower debt levels vis-a-vis the fears in the early part of pandemic and robust export demand have shaped ratings. Also ratings have started to factor in expected revival in private consumption, the rating agency said.

A resilient corporate performance in FY21 in a significant part of the manufacturing sector including lower debt levels vis-à-vis the apprehensions in the early part of the pandemic

With steady progress in vaccination and gradually declining risks of a third wave of the pandemic, private consumption demand is expected to revive from H2FY22.

Significant number of monetary policy steps by the Reserve Bank of India since the outbreak of Covid-19 helped the corporate and the financial sector to meet their funding requirements and stabilise their liquidity position.

Also, measures like the Emergency Credit Line Guarantee Scheme (ECLGS) with an initial amount of Rs three trillion enabled lenders to disburse additional funds to enterprises facing a working capital crunch, Acuite added.

Buoyancy in the export sector since H2FY21 which have largely offset the weak demand in the domestic sector. Finally, a favourable monsoon conditions and healthy agricultural output since last year has kept rural demand at steady levels despite a moderate impact of the second wave of Covid, it added.