The proportion of higher category ratings “LAA” and “LA” declined from 50.6 per cent in April 00 to 42.9 per cent in April 02.
The “LAAA” rated entities predominantly consist of banks and strong PSUs. As in April 02, these entities comprised almost 70 per cent of the total “LAAA” ratings. “LAAA” rated companies other than banks and PSUs accounted for only 5.5 per cent of the total long-term ratings in April 02 as compared to 8 per cent in April 00, said the agency.
A study on the agency’s rating transitions has found that ratings have shown a shift towards lower categories when there has been a deterioration in the general economic environment”.According to Icra executive director and chief rating officer Naresh Takkar, the ratio of the number of Icra rating downgrades to upgrades has been higher in the phases of downturn.
During 1999-01, which marked a period of relative stability after the Asian meltdown, there was a decrease in the number of downgrades, while there was no dramatic increase in the number of upgrades.
With the economic environment deteriorating during 001-02, there was a decline in the number of upgrades, whereas the number of downgrades remained almost the same, he said.