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Are recent credit rating upgrades a sign of recovery? A look at India Inc’s financial health

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Somasekhar Vemuri, Senior Director, CRISIL Ratings and Jitin Makkar, Vice President- Credit Policy, ICRA, shared their views and outlook on India Inc’s financial health.

Rating agencies have upped the ratings of some prominent companies in sectors like steel and banking in the recent past. Will there be a cycle of rating upgrades or are these just one-off upgrade?
Somasekhar Vemuri, Senior Director, CRISIL Ratings and Jitin Makkar, Vice President- Credit Policy, ICRA, shared their views and outlook on India Inc’s financial health.
Vemuri believes one month is too shorter timeframe to look at the trend picture. “If you look at first six months, we saw downgrades outnumber upgrades and our credit ratio was around 0.54 times. Our expectation was that even in the second half we would see pressure continuing. Albeit we are seeing green shoots in terms of high frequency indicators and several sectors are bouncing back, the underpinning of credit pressures continue,” Vemuri said.
Makkar believes "we are in a better shape as compared to Q1".
“Starting from today, 12 months from today, things have improved sequentially. Compared to Q1, we are in a better shape but that does not mean that compared with FY20 or Q4FY20 we are looking at a situation where credit quality pressures have abated, that is not the case,” Makkar said.
“One month is quite a short period to establish trends, ratings do not work like that. It is a forward looking process and just because large number of entities would have been downgraded in H1 of FY21 does not mean that incrementally we would see a trend reversal,” Makkar said.
For entire discussion, watch video...

Market Movers

CompanyPriceChng%Chng
Hindalco417.35 17.30 4.32
SBI Life Insura1,105.15 28.50 2.65
Tata Steel1,330.65 32.70 2.52
Bajaj Finserv13,807.85 282.80 2.09
SBI429.95 6.65 1.57
CompanyPriceChng%Chng
Tata Steel1,330.50 32.40 2.50
Bajaj Finserv13,801.20 275.85 2.04
SBI429.45 6.15 1.45
Bajaj Finance6,231.20 69.05 1.12
Nestle18,238.45 160.90 0.89
CompanyPriceChng%Chng
Hindalco417.35 17.30 4.32
SBI Life Insura1,105.15 28.50 2.65
Tata Steel1,330.65 32.70 2.52
Bajaj Finserv13,807.85 282.80 2.09
SBI429.95 6.65 1.57
CompanyPriceChng%Chng
Tata Steel1,330.50 32.40 2.50
Bajaj Finserv13,801.20 275.85 2.04
SBI429.45 6.15 1.45
Bajaj Finance6,231.20 69.05 1.12
Nestle18,238.45 160.90 0.89

Currency

CompanyPriceChng%Chng
Dollar-Rupee74.46000.04250.06
Euro-Rupee88.14600.44400.51
Pound-Rupee103.38800.70900.69
Rupee-100 Yen0.67900.00490.71