Negative rating actions on firms elevated to 32 per cent in the primary half of the present monetary yr from 23 per cent in the year-ago interval, indicating severe disruption to companies due to the coronavirus pandemic, says a report.
Of the 32 per cent unfavorable rating actions, as a lot as 17 per cent have been downgrades and upgrades have been a paltry 5 per cent in the primary six months of 2020-21, Icra Ratings mentioned in a notice on Thursday.
The high 5 sectors that noticed most unfavorable rating actions have been textiles, actual property, hospitality, auto ancillaries and building.
In the primary half of this fiscal, Icra took unfavorable rating actions on 582 firms, which account for 32 per cent of the overall entities that it charges. It was solely 23 per cent in the identical interval a yr in the past.
The knowledge relates to the efficiency of economic, non-financial and public finance rankings and don’t cowl the efficiency of structured finance rankings.
“Around half of the negative rating actions were downgrades. As downgrades rose, the annualised downgrade rate touched a high of 17 per cent in H1, up from 10 per cent in the year-ago period. As against this, there were only 94 upgrades in H1, reflecting an annualised upgrade rate of a mere 5 per cent, as against 9 per cent in the previous year,” Icra mentioned.
Textiles, actual property, hospitality, auto ancillaries and building noticed the utmost a unfavorable rating actions through the reporting interval and all these sectors, barring hospitality, have been already dealing with a requirement slowdown prior to the onset of the pandemic.
Only 11 defaults have been reported by the businesses rated by the company in contrast with 83 defaults in the entire of FY20. However, Icra mentioned this was as a result of 27 per cent of those firms selected to go for moratorium.
While credit score high quality pressures have remained elevated, the state of affairs might have been worse with out the interventions seen on the fiscal, financial and regulatory fronts. The mitigating results of those measures manifested favourably in the broader monetary markets in addition to some particular sectors, the report mentioned.
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