Rating for Indian companies stable in Q1: CARE

After witnessing a spate of poor ratings, Indian companies saw stability in their credit ratings in the first quarter of FY14, CARE Ratings said on Monday.

However, the progress in this trend would depend on various extraneous factors such as favourable policy actions, exchange rate and interest rates, the agency added. During the quarter, ratings of 80 per cent companies were retained, CARE Ratings said in a statement. It indicates a marginal improvement in the economy in the first quarter, it added.

CARE’s analysis is based on modified credit ratio (MCR), which is the ratio of upgrades against downgrades in ratings of the companies. An increase in MCR means stable and improving financials of the rated companies.

CARE’s MCR was continuously on the decline till the fourth quarter of FY13 from the second quarter of FY12, with the exception of the second quarter of FY13, when it registered marginal increase.

MCR has declined from 1.67 to 0.80. However, in the first quarter of FY14, this ratio increased to 0.91 from 0.80 last quarter, said CARE.

The total number of upgrades stood at 39, compared to 98 downgrades. However, 549 companies’ ratings were reaffirmed by CARE.

Construction, iron and steel had highest number of downgrades in the first quarter, while wholesale and retail trade also saw a significant number of downgrades, according to CARE. However, the textile sector has shown considerable improvement recording the highest number of rating upgrades.