Mumbai: The credit quality of Indian companies has improved a little in 2009-10 on better profitability and funding access, after peaking in the second half of 2008-09, ratings agency Crisil said on Thursday .
Easing interest rate burden, cheaper overseas borrowings over rupee-denominated loans and improved market valuations providing relief in the form of institutional placements and preferential allotments helped ease credit quality pressure of Indian companies, it said in a statement.
“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,” Raman Uberoi, senior director at Crisil Ratings, said.
Total interest expenses for 403 non-financial companies in the S&P CNX 500 index dropped 5% in Jan-March quarter, and by another 12% in the April-June quarter, compared with the preceding quarters, the Crisil study said.
Corporate profitability bounced back after January 2009 because of lower commodity prices and funding costs and it crossed levels last seen in 2007-08 in the June 2009 quarter, it added.
However, easing of credit pressure does not mean a return of credit strength as profiles of Indian companies remain vulnerable to demand uncertainty, said Ajay Dwivedi, director, Crisil Ratings, in a statement.
“This is especially true for companies that earn significant revenues from rural markets, which are exposed to the effect of drought this year,” Dwivedi said, adding credit profiles are also vulnerable to interest rate increases and exchange rate uncertainty.