Large corporate credit profiles still under pressure: Icra

MUMBAI: Commodity prices, currency movements and monetary actions by central banks will impact corporate credit ratings in fiscal year 2017 and improvement in sectors under stress will be a long drawn affair, credit rating agency ICRA said on Friday.

ICRA upgraded credit ratings of 785 issuers and downgraded 553 issuers in the fiscal year ended March 2016. Ratings of more than 80% of the 7,371 issuers the rating agency tracks remained unchanged, ICRA said.

“The number of upgrades by ICRA exceeded downgrades for three consecutive years in FY2016,” the rating agency said adding that on an average credit ratings have remained at BB over the last several years, though credit quality remains under strain.

“Among the ratings upgraded by ICRA, around 60% were driven by issuer-specific factors such as improving competitive position, successful project commissioning, sustainable cost curtailment, improving business diversification, mobilization of fresh equity and asset sales undertaken for deleveraging. Among those downgraded, around 20% of the rating actions were prompted by weak outlook on demand or depressed realizations, an additional 20% were because of worsening of the working capital cycle and around 10% were caused by delays in project commissioning and cost over-runs,” Jitin Makkar, head, credit policy, ICRA said.

Sectors like metals & mining, real estate & construction, roads and engineering have been under pressure due to weak demand, pressures on realizations, policy deficiencies and structural issues, ICRA said. These four sectors accounted for 40% of the total ratings downgraded by ICRA in FY2016.