As the economic growth slows, the big question looming large is whether a tight financial market and low investor confidence push India Inc into further distress?
To discuss this, CNBC-TV18 spoke with SK Somasekhar Vemuri, senior director at Crisil Ratings and Sanjay Agarwal, senior director at Care Ratings.
"Looking at the rating action trends and rating ratios, which is upgrades to downgrades, we continue to have credit ratio which is more than 1," Vemuri said on Wednesday.
According to Vemuri, there will be a little bit moderation in credit ratio going forward and in the portfolio of companies that they rate. “In terms of the portfolio of companies that we rate, we see buoyancy in terms of upgrades outnumbering downgrades and this is likely to continue even in FY20,” he said.
Agarwal said that they too do not see a significant increase in the number of downgrades. “In companies with sales of less than Rs 100 crore, the upgrades are lower than the downgrades. The upgrade-downgrade modified credit ratio is at 0.89, whereas in larger companies the ratio is 0.98 for last year. So it is marginally at an equal level but smaller companies are seeing more pressure than larger ones,” said Agarwal.
Defining modified credit ratio, Agarwal said, “Here the numerator is upgrades plus reaffirmation and denominator is reaffirmation plus downgrades. So for every 98 companies which have either been upgraded or reaffirmed, we have 100 companies that have been downgraded or reaffirmed.”
On the liquidity situation, Vemuri said, "Compared to tightness in terms of access to funds seen in September-October last year that NBFCs and HFCs faced, the situation has improved currently. However, access to easy liquidity is no more there and so to that extent lot of NBFCs have moderated their growth aspirations."