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Credit ratio to moderate to 2.19 times in 2nd half of FY 23: CRISIL

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New Delhi: Rating agency CRISIL on Monday said it’s credit ratio (upgrades to downgrades) will moderate to 2.19 times in the second half of fiscal 2023 from 5.52 times in first half of fiscal 2023.

“Our Ratings Round-Up report for the first half of fiscal 2023 had presaged this because rising global inflation and the resultant interest rate hikes were expected to temper growth and weigh on the credit ratio,” the agency said.

In all, there were 460 upgrades and 210 downgrades across sectors in the second half, it said.

While the upgrade rate fell 320 basis points from the first half, and stood at 13.46%; however it was still higher than the 10-year average (up to fiscal 2022) of 10%, it added.

Gurpreet Chhatwal, Managing Director, CRISIL Ratings, said, “India Inc’s balance sheets have significantly strengthened and gearing levels continue to be decadal low. The median gearing of the CRISIL Ratings rated portfolio is expected be 0.45 time as at fiscal 2024 end, marking a correction from fiscal 2023. This, along with steadfast domestic demand and the government’s unwavering focus on infrastructure spending, has kept the upgrade rate elevated.”

“These reasons will lend a positive bias to the credit quality outlook of India Inc, going forward. The downgrade rate, on the other hand, has gone up to 6.14% and almost reverted to its 10-year average rate,” he said.

“The downgrade rates have started reverting to their long-term averages. Volatile commodity prices have impacted profitability, particularly of micro, small and medium enterprises (MSMEs), while export-oriented sectors face headwinds from slowdown in their major markets,” Chhatwal said.

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