Consumer discretionary companies face hit on their ratings

Mumbai: Ratings of consumer discretionary companies are looking increasingly dismal, with revenues for many in industries such as jewellery or automotive ancillaries set to slide by as much as 30% in FY21. And that bleak outlook is affecting their credit worthiness in the eyes of independent evaluators – credit rating firms.

Of the negative 27 rating actions that India Ratings undertook between mid-April and mid-May, 53% concerned industries in the consumer discretionary segment – gems, jewellery and auto-parts makers. Eight ratings were downgraded, while 19 were either assigned a ‘negative outlook’ or placed under ‘negative’ rating watch.

Ratings firm Crisil has forecast that consumer discretionary services and products are expected to be the worst hit by the lockdowns. Revenues could dip by up to 30% in FY21.


Separately, Icra has categorised retailing and gems and jewellery in the high-risk categories. Furthermore, business recovery for these industries is also likely to be more prolonged, heightening credit risks. On the macro-economic front, most credit-rating agencies have factored in a 5% contraction.

Icra may also be redrawing its projections, assuming that a ‘business as usual’ operating environment may not return soon. Even after restrictions have been eased in phases since mid-May, aggregate output has not revived due to labour constraints at production centres.