BackInfra firms sees most upgrades, export sector most downgrades during H1FY24
Crisil expects a significant increase in private capital expenditure to get underway only a few quarters later because of current challenges like higher interest rates and inflation
PremiumNew Delhi: Rating agencies Crisil Ltd. and India Ratings and Research (Ind-Ra) upgraded over 550 debt ratings, and downgraded more than 250 during April-September period of the current fiscal (H1FY24). Infrastructure and related sectors accounted for a large chunk of the upgrades and export-oriented firms witnessed the most downgrades due to a slowdown in global trade.
In April-September FY24, there were 443 upgrades and 232 downgrades, said Crisil.
While upgrades remained higher than downgrades, Crisil's H1FY24 rating upgrades dipped to 12.70% from 13.46% in H2FY23. Downgrades rose to 6.65% from 6.14% during H2FY23.
"The upgrades were driven by an expected expansion in cash flows this fiscal for sectors linked to domestic demand and for those benefiting from high government spending," Crisil said in a statement. “These sectors, such as infrastructure, services and consumables, kept the overall upgrade rate elevated."
Downgrades have been inching up lately, primarily due to difficulties faced by export-linked sectors due to a global slowdown, even as strong balance sheets somewhat cushioned the impact of heightened risks overseas.
Meanwhile, India Ratings and Research upgraded ratings of 146 issuers, and downgraded ratings of 55 issuers during H1FY24.
"Manufacturing and service corporates rating upgrades intensity, particularly the large corporates, has slowed down for one year now," India Ratings said in a statement. “Infrastructure and financial corporates have largely maintained their rating upgrade intensity."
India Ratings said that infrastructure asset operators, largely from the renewable power sector, consistently contributed more than a quarter of upgrades, while the downgrades in these sectors were from sponsor-related issues.
"Continued government capex (capital expenditure) spending and green shoots in private capex have supported positive rating actions for construction (EPC for railways, solar power) and capital goods companies," it added.
Crisil expects a significant increase in private capital expenditure to get underway only a few quarters later because of current challenges like higher interest rates and inflation.
“For domestic and infrastructure-linked sectors, the conditions now seem ripe for the much-awaited private capex cycle to restart, given the increase in capacity utilisation, deleverage balance sheets and steadfast demand," said Gurpreet Chhatwal, managing director, Crisil Ratings.
"However, with only brownfield expansions seen in some pockets, a significant uptick in private sector capex may be a few quarters away as India Inc remains circumspect about higher interest rates and inflation leashing demand," Chawla added.
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