Stress to persist in FY ’15 said ICRA
According to an ICRA study, in 2013-14 while the number of downgrades exceeded upgrades for the third consecutive year, with 602 downgrades and 559 upgrades, overall, 3.3 per cent companies moved to the default category as against 4.5 per cent in 2012-13.
ICRA said ,“During the last fiscal while both the number and severity of rating downgrades moderated, pressures on credit quality persisted against the backdrop of sluggish economic activity and the strains on cash flows and profitability due to weak demand growth.”
The study is based on actions of over 7,000 ICRA-rated companies in fiscal 2014, it said.
The study said, in fiscal 2014 downgrades as a percentage declined to 9.6 per cent, after having peaked at 20.3 per cent in fiscal 2012.
From investment grade to non-investment grade companies downgraded from 3.3 per cent in fiscal 2013 to 1.3 per cent in fiscal 2014.0.9 per cent moved to the default category as against 1.4 per cent in FY13, among investment grade entities.
ICRA said, in 2012-13 upgrades as a percentage of opening issuers increased from 4.7 per cent to 9 per cent in 2013-14.
The decline in inverse credit ratio, which is the ratio of downgrades to upgrades, declined to 1.1 per cent in the reporting year from exceptionally high levels of 3.4 per cent in the previous fiscal and 2.6 per cent in 2011-12, the report said.
In 2013-14 sectors that reported inverse credit ratios inferior to the median include hotels, power, sugar, metals and mining, engineering, transportation, real estate and construction.
Source: Deccan Herald
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