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‘Credit quality improves since FY14 2nd quarter’

The credit-worthiness of Indian firms improved significantly since the second quarter of the last fiscal compared with the corresponding period a year ago.

By: ENS Economic Bureau | New Delhi |
July 5, 2014 12:54:19 am

The credit-worthiness of Indian firms improved significantly since the second quarter of the last fiscal compared with the corresponding period a year ago.

According to credit ratios analysed by rating agency CARE, upgrades have outnumbered downgrades marginally since Q2 FY14, reflecting an improvement in the credit quality of rated entities. Further, during the April-June period of 2014-15, rating of 144 entities was upgraded while it was downgraded for133 entities. Some 542 entities saw their ratings being reaffirmed.

“CARE’s modified credit ratio (MCR) in the first quarter of the current fiscal is at 1.02…Sectors such as auto, chemicals, construction, electricity, information and communication, paper and paper products and telecom have displayed encouraging increase in MCR in Q1 FY15,” the report said.

On the other hand, sectors including textiles, iron and steel, hospitality, education and agriculture saw a “noticeable moderation” in their credit ratios during the period. The ratio are indicative of the overall business and economic environment in the country. An MCR closer to one indicates higher stability in ratings, with larger proportion of reaffirmations.

The upgrades and reaffirmed ratings shot up in April-June period of FY15 when compared to the corresponding period last year. In the same period in FY14, while 25 entities were upgraded, 369 entities saw their rating being reaffirmed. The ratios, which had witnessed a sharp and steady deterioration between the July-September period in FY12 to January-March period in FY13, “have remained fairly in the last four quarters”, the agency said. Between the said period, the ratio had moved from 1.12 to 0.81 with downgrades outnumbering upgrades.

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