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Indian corporate credit quality remains strong

October 06, 2022

Indian corporate credit quality remains strong
Debt light balance sheets, domestic demand and better cash flows has resulted in higher credit ratio during the first half of FY23, said CRISIL Ratings.

According to CRISIL Ratings the corporate credit ratio (upgrades vs downgrades) continues to be high at 5.52 times in the first half of this fiscal (H1-FY23) underscoring ongoing broad-based improvement in India Inc’s credit quality. The credit ratio was 5.04 times in the second half of the last fiscal (H2-FY22).

Three reasons stand out: 1) strengthening domestic demand, with the economy expected to grow 7.3 per cent this fiscal; 2) higher realisations leading to better cash flows; and 3) continuation of debt-light balance sheets as capex remains low, CRISIL Ratings said.

The credit ratio is in line with the positive credit quality outlook CRISIL Ratings had articulated earlier that upgrades will far outnumber downgrades through this fiscal.

Credit ratings on nearly 80 per cent of the CRISIL Ratings portfolio was reaffirmed, or there was no change during H1-FY23.

For the rest of the portfolio, what has changed is the upgrade rate, which increased to 16.70 per cent, while the downgrade rate was flattish at 3.02 per cent. In all, there were 569 upgrades and 103 downgrades.

According to the credit rating agency, the performance of upgraded companies improved significantly over the past three fiscals despite severe pandemic-related disruptions.

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