Slowing demand: Credit profile of India Inc continues to deteriorate, says Crisil

By: |
Published: October 2, 2019 9:09:03 AM

The outlook is one of caution mainly due to lower domestic consumption, slowing global growth, which is impacting exports, slackening pace of government spending and risk aversion by investors impacting the resource availability in key sectors.

Crisil’s debt weighted credit ratio (value of debt1 upgraded to downgraded) in the first half of this year has plunged to 1.21 times — the lowest in the past six half-yearly assessments.

Ratings agency Crisil on Tuesday reported the highest number of downgrades in the first six months of FY20 since 2016. The agency attributed the deterioration in the credit profile of corporate India to slowing growth, flagging demand and trade tension, as economic growth moderated to its slowest in six years at 5% y-o-y in the April-June quarter. Constrained access to funding had also affected the credit profiles of entities across sectors, especially non-banks and real estate, it noted.

The value of debt downgrad-ed trebled to Rs 1.38 lakh crore in the first six months of FY20, which is the highest in the comparable period since 2016. In the first half of FY19, value of debt downgraded stood at Rs 39,000 crore. Crisil’s debt weighted credit ratio (value of debt1 upgraded to downgraded) in the first half of this year has plunged to 1.21 times — the lowest in the past six half-yearly assessments. The credit ratio in FY19 stood at 1.73 times.

The fall in credit ratios was seen across investment-, export-, and domestic-consumption-linked sectors. So far, it has been the highly leveraged companies that showed stress, but with consumption slowing down, even companies with strong balancesheets are slowing some stress. The agency noted that entities with higher leverage saw more downgrades as pressure from the demand slump intensified. “Declining profitability and stretch in working capital cycles also were reasons for the downgrades,” it observed.

The outlook for the rest of the year remains cautious as demand is not showing any clear sign of reviving, Crisil observed. The outlook is one of caution mainly due to lower domestic consumption, slowing global growth, which is impacting exports, slackening pace of government spending and risk aversion by investors impacting the resource availability in key sectors.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1Reliance Jio effect: Vodafone-Idea, Airtel cut ring time to 25 seconds
2GoAir CFO Sanjay Gupta asked to leave
3SoftBank arm seeks CCI nod to raise stake in Delhivery