Zero defaults by firms for first time in 10 years

The companies, which are from three important segments — manufacturing, financial services and infrastructure — did not see any downgrade during the period. There were 25 upgrades and manufacturing and financial services sectors led the improvement in overall credit quality with 13 and 10 upgrades, respectively. The upgrades in financial sector were driven by a re-assessment of Crisil’s expectations of government support to public sector banks, Crisil said in a statement on Tuesday.

Aggressive financial and operational restructuring over the last few years has improved the manufacturing sector’s competetitveness across a spectrum of industries, Crisil executive director and chief rating officer Roopa Kudva said. With rising inflation, real interest rates have continued to decline and it has impacted the profitability of companies positively. Lower real interest rates have also made investment in new capacities possible.

According to an analysis of 200 Crisil-rated companies, the capex to networth ratio is expected to grow to 18.6% from 13.7%. A strong upsurge in the production index for machinery and capital goods also substantiates the improvement in the investment climate, Crisil said. Higher corporate demand for funds may firm up nominal interest rates in the second half. As the oil shock-induced inflationary pressure recedes, real interest rates will turn positive, but will remain low, the rating agency noted.

Crisil recently upgraded public sector Bank of Baroda, Canara Bank, IDBI Bank, Indian Overseas Bank and Syndicate Bank. Other major upgrades were Bharti Cellular, M&M, SAIL, Tata Motors and Tata Power Company.