Has the credit profile of Indian corporates improved and have they reduced their debt load? It depends on which rating agency you want to believe.

In its update on rating movements, Crisil Ratings said that there is broad-based and sustained improvement in corporate credit profile. The firm saw upgrades exceed downgrades for fiscal year 2019 (FY19) indicating improved health of corporate balance sheets. Crisil’s credit ratio, which is the number of upgrades to the number of downgrades, climbed to 1.81 for the October-March period from 1.68 in April-September. Companies have deleveraged their balance sheets to a large extent and have conserved their capital, the rating agency’s officials said in a conference call with the media.

In contrast, Icra Ltd said in a release that Indian companies are still under considerable stress as its “rating drift", which is again the upgrades to downgrades ratio, has dropped to negative 12%, from negative 11% in FY18. “ICRA’s rating actions in FY19 indicate a persistent pressure on the credit quality of India Inc. during the year," it said.

The stark difference between the two rating agencies could be partly because of the fact that debt of Infrastructure Leasing and Financial Services Ltd (IL&FS) group was rated by Icra Ltd and CARE Ratings. Crisil has no ratings on IL&FS. Since June last year, IL&FS began defaulting on its debt payments and, hence, the ratings of a clutch of group companies, including the parent, were downgraded sharply by Icra.

This is not the first time both rating agencies have differed. Crisil and Icra gave a contrasting picture of credit risk even for the first six months of FY19 before IL&FS began defaulting.

To be fair, there are similarities in the opinion of both rating agencies as well. Both agree that stress is restricted to specific companies and is not broad-based. For instance, the downgrade of two telecom companies skewed the credit ratio for Crisil, while for Icra, it would be the IL&FS group effect.

For investors, this means that the truth lies somewhere in between. Indian companies have indeed deleveraged, reflecting in the slow but steady progress of insolvency cases. But a healthy balance sheet is still some time away.