Consumption story drives India Inc's credit quality even before the festive season

India Inc's credit quality strengthened in the first half of the current financial year (FY24) owing to robust domestic consumption and investment-focused sectors, said ICRA in a report on Tuesday.

"Both the investment grade as well as the non-investment grade categories showed a net improvement in their credit profiles, even as the pace of improvement moderated in comparison with the previous two fiscals," the report stated.

There were six sectors, including hospitality, auto components, power, realty, roads and financials, which accounted for almost half of the total instances of upgrades in H1 FY2024.


The hospitality sector has been on a strong rebound trajectory lately after having borne a significant adverse impact of the pandemic in 2020 and 2021. The key operating metrics of the sector viz., occupancy rates and the average room rates have witnessed a sharp recovery, prompting several upgrades during the past 18 months.

Similarly, the increasing demand from the end-user industries, particularly passenger vehicles and commercial vehicles, has been contributing significantly to the upgrades of the auto component manufacturers (as also automobile dealers).

In the realty sector, healthy sales and collections in the residential segment and improved leasing activity in the commercial and retail segments, is supporting a reduction in the leverage levels of several entities—contributing to upgrades.

A few entities in the power sector were upgraded following the realisation of their stuck receivables from the power distributions companies, who cleared the dues under the Late Payment Surcharge (LPS) scheme.

Several road SPVs were upgraded in H1 FY2024, driven mostly by entity-specific factors concerning alleviation of project execution risk, reflected in the achievement of final/ provisional date of completion of the project and receipt of the initial few semi-annuities without any major deductions.

In addition, several financial sector entities are witnessing improving credit profiles backed by their steady credit growth, stable asset quality indicators, and equity capital mobilisation. This has driven several upgrades, particularly in the microfinance segment.