More credit rating upgrades, than downgrades, for Indian companies in April -September period

3 Oct 2022 , 09:05 AM

In contrast to downgrades, local companies received a record number of rating upgrades for the first half of the fiscal year, adding support to the claim that India is still largely uncoupled from the struggling global economy due to its unabated domestic consumption demand.

According to statistics from CareEdge Ratings, India’s credit ratio–a measure of the country’s overall creditworthiness that compares upgrades to downgrades–reached an all-time high of 3.74 between April and September of this fiscal year. It was 2.64 over the six months prior.

Although India’s creditworthiness outlook has improved, the West still risks downgrades due to its protracted war against inflation and geopolitical uncertainties, which together have sent several nations into recession.

Lenders immediately responded with additional rate increases after the Reserve Bank of India (RBI) increased the benchmark repo rate by 190 basis points to 5.90% between May and September. 0.01% is one basis point.

During this time, CARE downgraded about 79 companies while 318 companies had their ratings upgraded.

According to India Ratings, defaults were also at one of their lowest levels in the first half of FY23, falling from 1.4% in the same time a year earlier to 0.8% of the cooperative assessed ratings. Only 40 issuers had their ratings downgraded at that time, while 159 had them enhanced.

Enhanced credit profiles and liquidity options have been advantageous for businesses. Issuers now have easier access to funds for working capital.

As of September 9, bank credit increased by 16.2% year over year to Rs125.5 lakh crore. Compared to the same period last year, the rate of loan growth has more than doubled.

The unpleasant surge in inflation, however, has the potential to destabilize the economy, as price increases are likely to reduce rural consumer demand and temper corporate capital expenditure plans.

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