Crisil reports the highest number of upgrades in any six months in its history. Two credit assessors today certified India’s corporate sector as healthy and vibrant. Crisil Ltd, a unit of Standard & Poor’s, said it reported the highest number of upgrades in any six months in its history. Icra, partly owned by Moody’s Investors Service, noted improvement in operating environment.
Crisil, the largest rating agency, upgraded 253 of its outstanding ratings in the six months to September 30, from an expanded base of 5,300 ratings, with most of the upgrades coming from across industries and rating categories.
“The stronger credit quality of Indian companies has been driven by robust improvement in economic activity, and a healthier funding environment,’’ Crisil said in a statement. “Domestic demand remains upbeat in most sectors and is likely to help the economy maintain a high growth rate.’’
Companies were also benefiting from improvement in accessing funds from banks, equity and debt – locally and globally, it said. Crisil’s universe of companies includes a majority of small and medium-sized companies, which account for about 40 per cent of all outstanding bank loans.
According to Icra, the key reasons for the rating upgrades include improved demand conditions and prospects, better profitability, shorter working capital cycles, improved capital structures, and benign outlook for operating environment and financial markets.
The number of upgrades has been increasing consistently from 25 in the six months to September 2009 to 68 in the second half of 2009-10 and 131 in the six months to September 30, 2010, reflecting improvement in operating environment.
Icra said the number of downgrades, which rose to 79 in the first half of 2009-10 and 101 in the second half of the year, fell to 80 in the first half of 2010-11.
Crisil reported 111 downgrades during the six months. Most of the downgrades came from sub-investment grade.
While companies are basking in improved times, they face a downside from higher inflation, rising cost of funds and capacity constraints, according to Crisil. The profitability margins could get squeezed due to rise in commodity prices and capital costs.
Crisil holds on to its estimate of 8.5 per cent growth in India’s gross domestic capital for the year to March 2011. India’s GDP may grow between eight per cent and 8.5 per cent in the medium term, it said.
