Indian cos credit quality improves, recovery may be bumpy

MUMBAI: After a dramatic free-fall in fiscal 2009, the credit quality of Indian companies has now started to stabilise led by positive stock market conditions and the Government's monetary easing, a study by rating agency Crisil Ratings said.

CRISIL's Modified Credit Ratio (MCR) increased to 0.88 for the first-half of 2009-10, after dropping to a nine-year low of 0.86 in 2008-09, the agency said in a report.

"Companies have easier access to funds, as a result of the Governments fiscal and monetary easing, and positive stock market conditions; in addition, lower commodity prices have led to lower working capital requirements," Crisil said.

However, Crisil expects the recovery in credit quality to be gradual, and may not necessarily be smooth.

"There are signs that both the monetary and fiscal easing and the lower commodity prices are temporary. Additionally, unlike in the late 1990s, we see no prospect of a sudden and sustained upturn in economic conditions to lift corporate performance," CRISIL, Senior Director, Raman Uberoi, said.

Crisil said the Government was looking to reverse its "present supportive stance" of low interest rates and liberal monetary policies.