CRISIL Ratings raises India Inc credit quality outlook to ‘positive’

Rating agency CRISIL on Wednesday upgraded the credit quality outlook of India Inc for FY22 from “cautiously optimistic” to “positive”, predicated on a sustained recovery in demand. This comes after the blip caused by the second wave of the pandemic in Q1FY22.

A CRISIL Ratings study of 43 sectors (accounting for 75 per cent of the ~36 trillion of rated debt, excluding the financial sector) shows that the current recovery is broadbased.

As many as 28 sectors (85 per cent of outstanding corporate debt under study) are on course to see a 100 per cent rebound in demand to prepandemic levels by the end of this fiscal, while six will see upwards of 85 per cent.

The credit ratio (upgrades to downgrades) in the first four months of this fiscal improved to more than 2.5 times. It had touched a decadal low of 0.54 time amid the first wave in the first half of fiscal 2021, before recovering to 1.33 times in the second half, buoyed by a rebound in demand.

Among sectors with the most rating upgrades, construction and engineering, and renewable energy benefited from the government’s thrust on infrastructure spending.

The steel and other metals gained from higher price realisations and profitability. But the contact-intensive sectors such as hospitality and education services continue to bear the brunt of the Covid-19 pandemic and have had more downgrades than upgrades.