No relief in sight for debt laden India Inc: Crisil

MUMBAI: Corporate India will continue to reel under debt unless there is a substantial improvement in investment, monsoons are favourable and the government pushes for reforms, credit rating agency Crisil said in a report on Monday.

In the six months ended March 2016, the quantum of corporate debt upgraded versus downgraded - stood at 0.2, the lowest in the last three years, while the debt of firms downgraded by the rating agency in the fiscal year 2016 has risen to an all-time high of Rs 3,80,000 lakh crore, Crisil said.

“More than half of this debt belonged to firms in metal sector, which were hit by falling realisation and high debt. And the second-biggest chunk of about a quarter belonged to the infrastructure sector,” Crisil said.

The rating agency does not expect any sharp improvement in credit quality in the near term with infrastructure and metal-linked sectors likely to continue facing headwinds, while consumption-linked firms with low leverage will see some uptick in credit quality.

“And the debt-weighted credit ratio will continue to languish below 1, which is expected to reflect in likely increase in weak assets of banks. The ratio can turnaround only if there is substantial deleveraging of stressed balance sheets through sale of non-core assets, or a sharp reversal in metal prices,” Crisil said.

Sectors with strong domestic consumption linkages such as auto ancillaries, or with inelastic export demand such as pharmaceuticals, remain better placed with a relatively robust credit quality metrics.