India Inc's credit profile shows robust performance in Fy23: India Ratings

Sustained deleveraging, continued revenue, profitability growth boost rating

The credit profile of companies in India in the Financial Year 2022-23 showed strong performance for the second year as the corporate downgrade-to-upgrade (D-U) ratio declined to 0.26 at end of March 2023. The ratio was at 0.31 in Fy22, according to rating agency India Ratings.  

During the year, the agency upgraded the ratings of 295 issuers, representing 21 per cent of the reviewed portfolio. The rating downgrades were significantly lower, seen in only 78 issuers.

Arvind Rao, Senior Director Ind-Ra said rating upgrades continued to draw support from sustained deleveraging, continued revenue and profitability growth and availability of liquidity.

Domestic drivers seen through consumption-led demand (premium segment), and investments (mainly government capex) contributed to the business growth. Transmission of commodity prices to end customers supported profitability amid stubborn inflation and elevated interest costs, the agency said.

Downgrades including defaults were contained, as corporates, even with lower credit ratings, had access to funds from financial institutions. Concerns about unwinding of various pandemic-related funding measures creating liquidity challenges, especially for the mid-corporates, were largely abated as corporates were able to meet their debt obligations from internal accruals.

Indian corporates increased their clout in overseas markets led by strong demand from the US and some realignment from China due to supply chain diversification. Amid the doom and gloom of the global economy, the Indian market appeared to be partly delinked to global woes and corporate India remained one of the few shining spots, it added.

Suparna Banerji, Associate Director Ind-Ra said among the sectors which witnessed positive rating actions, infrastructure asset operators led the pack. Close to a quarter of the upgrades were from renewable power and road operators. These corporations either had their capacities coming online or strengthened their operating performance. Textiles and auto components corporates saw rating upgrades due to favourable demand and the China+1 strategy.

Downgrades were witnessed largely in companies engaged in construction that saw order execution getting delayed and in wind power generation companies (most of them with the same promoter) following a continuous decline in the power generated. Other downgrades were scattered across sectors and were due to individual entity-specific factors.

During FY23, upgraded mid-sized corporates witnessed an improvement in their operating performance across the rated portfolio, supported by positive business sentiments. This was in contrast to FY22, where a divergence in recovery was seen with mid-sized corporates lagging their large peers, Ind-Ra said.