About 3,400 rated firms eligible for recast under fresh rules: CRISIL

Actual number of units going for recast could be much lower as the impact of pandemic might be contained over next 2-3 months, says rating agency

About 3,400 investment grade firms from the Crisil-rated pool with an overall debt of Rs 50,000 crore will be eligible for debt restructuring under Resolution Framework 2.0 put in place to soften the blow from the second Covid-19 wave.

However, the actual number of units opting for recast could be much lower as the impact of pandemic might be contained over the next 2-3 months, according to the rating agency.

Amid the Covid resurgence, the RBI announced a slew of steps on May 05, including a restructuring window to mitigate impact of the pandemic on the businesses and individuals.

Companies with relatively weaker credit profiles, and belonging to low-resilience sectors are expected to gain more from the scheme. The restructuring would entail rescheduling of their financial obligations, thereby easing liquidity pressure.

Though localised at the moment, disruptions caused by the second wave of the pandemic have the potential to hit smaller businesses. These units are yet to fully recover from the blow dealt by the first wave.

The agency has analysed the impact of the proposed restructuring on a sectoral basis, categorising 43 sectors (excluding the financial sector) into three categories – high, moderate and low resilience. Crisil rates about 6,800 mid size entities and half of them would be eligible for restructuring.

Rahul Guha, Director, Crisil Ratings said companies in low-resilience sectors such as retail, hospitality, auto dealerships, travel and tourism, and residential real estate are likely to be impacted the most. Therefore, they are more likely to opt for the restructuring.

On the other hand, companies in high-resilience sectors such as chemicals, pharmaceuticals, dairy, information- technology and consumer staples/FMCG may not face any significant liquidity pressures. These units are expected to benefit from steady consumer demand and will be least likely to go for restructuring.

Borrowers including individuals, small businesses and MSMEs having aggregate exposure of up to Rs 25 crore would be eligible for restructuring. Those units are standard (dues upto 90 days) as of March 31, 2021 can avail of restructuring.

Those whose debt has been restructured under any of the earlier restructuring frameworks including under Resolution Framework 1.0 dated August 6, 2020 are not eligible for recast under the new scheme.