Mumbai: Despite an easing of pressures on credit quality and improving sentiment, defaults by Indian companies continue to be on the rise, as is the number of downgrades by rating agencies.
Crisil Ltd, a subsidiary of Standard and Poor’s, has upgraded 13 companies so far this fiscal and downgraded 90 companies. In the last full year, it had upgraded only two while downgrading 84 entities.
In a conference call, Crisil’s senior director Raman Uberoi warned that defaults are on the rise. In the first four months of fiscal 2010, the total number of defaults stood at 14, against 13 for fiscal 2009, taking it to an at least 10-year high.
“We can say that the season of upgrades have returned but downgrades will likely outnumber the upgrades by a wide margin,” said Uberoi, adding that Crisil’s ratings coverage has added about 1,500 companies to 2,800.
“We can say that the season of upgrades have returned but downgrades will likely outnumber the upgrades by a wide margin,” said Uberoi.
However, Crisil said in a research report that pressure on Indian companies’ credit quality has been eased somewhat because “improved access to funds at reasonable rates has helped, as has an increase in profitability over the past two quarters.” Monetary easing by the Reserve Bank of India has also helped to improve credit quality, it said.
Icra Ltd, an associate of Moody’s Investors Service, upgraded 13 companies while downgrading 52 in the four months of fiscal 2010. For all of fiscal 2009, Icra had downgraded 60 firms while upgrading only two, according to Vibha Batra, co-head of the financial sector ratings division.
Fitch Ratings has also upgraded only three Indian firms in the last four months and downgraded 37 entities, including securitization of loans. In 2008-09, it had downgraded 37 and upgraded nine.