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Corporate credit quality showing signs of recovery: Ratings
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SME Times News Bureau | 07 Oct, 2014
In line with a slight turnaround in the economy, the credit quality of
corporate debt is also showing signs of recovery, according to two
rating agencies CRISIL and CARE.
While this is indeed a good sign
at the start of the third quarter, further improvement of credit
quality is expected to be gradual and any significant recovery will be
contingent upon a sustainable increase in investment demand, CRISIL,
subsidiary of Standard & Poor's said in statement.
CARE
Ratings said there had been a sharp increase in the number of upgrades
in the September quarter, where upgrades have doubled over the year-ago
period.
The two domestic agencies said their respective ratios of
rating movements are pointing towards early signs of recovery in Asia’s
third-largest economy which expanded at a healthy pace of 5.7 per cent
in the April-June period.
“Corporate India’s credit quality is
showing early signs of recovery; upgrades exceeded downgrades in H1 -
741 upgrades compared to 451 downgrades,” CRISIL said in their report.
It
also said the improvement in credit quality will be gradual and a
significant recovery will be possible only on a sustained increase in
investment demand.
Pointing out that improvement in
business-related factors was the key driver for 60 percent of the
upgrades, CRISIL said export-linked sectors and non-discretionary
consumer segments like traders, packaged foods, pharmaceuticals,
textiles and farm products are getting enhanced ratings.
Companies
in the construction, engineering, capital goods and automobile
ancillary sectors had higher downgrades than counterparts in other
sectors, it added.
“Credit quality buoyancy in the overall
economy is still some time away, and for that to happen, investment
demand, which depends on the extent to which the government pushes big
ticket reforms, needs to increase substantially,” said CRISIL senior
director Pawan Agrawal.
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