Pressure on credit quality of cos eases
Rating agencies have indicated that pressure on credit quality has eased after peaking in FY09, but growth concerns continue to persist.
By ET Bureau |
MUMBAI: Rating agencies have indicated that pressure on credit quality has eased after peaking in FY09, but growth concerns continue to persist. Domestic ratings firm Crisil and global firm Moody���s have come up with similar conclusions, though their samples vary.
Crisil has concluded that ���although pressure on credit quality continues, its intensity has abated,��� based on the study of companies it rates. While Moody���s has conducted a liquidity survey of Asia-Pacific-rated corporates, which indicate that the liquidity profile and refinancing risk of the portfolio is gradually improving. But, they are still weak relative to the pre-crisis position, it has said.
The pressure on Indian companies��� credit quality has eased a little in the current financial year after reaching its peak in the second half of 2008-09.
Improved access to funds at reasonable rates has helped, as has an increase in profitability over the past two quarters. In the four months through July 2009, Crisil upgraded ratings of 13 entities and downgraded those of 90; in contrast, in the six months ended March 31, 2009, 81 ratings were downgraded and only one was upgraded. Raman Uberoi, senior director, Crisil Ratings, said: ���Companies have benefited from the accommodative stance of monetary policy, an increased appetite for risk in international capital markets, and improved sentiment in the Indian equity market.��� He, however, warned that though these gains may not last in the event of continued demand sluggishness, the resulting erosion of profits is likely to be controlled.
According to Moody���s, collectively, the number of companies with strong liquidity scores has slightly improved on a quarter-on-quarter basis since the end of the fourth quarter 2008. Debt due for refinancing on a rolling 12 months basis has fallen compared with the second quarter to the first quarter. But it has cautioned that liquidity positions is still weak. ���Approximately 34% of the Asia Pacific-rated universe is deemed to have insufficient liquidity, down from 43% at the end of 2008,��� said a release by Moody���s.
Crisil has concluded that ���although pressure on credit quality continues, its intensity has abated,��� based on the study of companies it rates. While Moody���s has conducted a liquidity survey of Asia-Pacific-rated corporates, which indicate that the liquidity profile and refinancing risk of the portfolio is gradually improving. But, they are still weak relative to the pre-crisis position, it has said.
The pressure on Indian companies��� credit quality has eased a little in the current financial year after reaching its peak in the second half of 2008-09.
Improved access to funds at reasonable rates has helped, as has an increase in profitability over the past two quarters. In the four months through July 2009, Crisil upgraded ratings of 13 entities and downgraded those of 90; in contrast, in the six months ended March 31, 2009, 81 ratings were downgraded and only one was upgraded. Raman Uberoi, senior director, Crisil Ratings, said: ���Companies have benefited from the accommodative stance of monetary policy, an increased appetite for risk in international capital markets, and improved sentiment in the Indian equity market.��� He, however, warned that though these gains may not last in the event of continued demand sluggishness, the resulting erosion of profits is likely to be controlled.
According to Moody���s, collectively, the number of companies with strong liquidity scores has slightly improved on a quarter-on-quarter basis since the end of the fourth quarter 2008. Debt due for refinancing on a rolling 12 months basis has fallen compared with the second quarter to the first quarter. But it has cautioned that liquidity positions is still weak. ���Approximately 34% of the Asia Pacific-rated universe is deemed to have insufficient liquidity, down from 43% at the end of 2008,��� said a release by Moody���s.
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