How Deleveraging Can Strengthen Creditworthiness

A sustained reduction in leverage is one of the most direct and closely tracked paths toward a stronger credit profile.

What Counts as Meaningful Deleveraging

Genuine deleveraging — through debt repayment funded by internal cash generation or equity infusion — is viewed more favourably than an apparent reduction in leverage ratios driven solely by a temporary EBITDA spike, since the latter can reverse quickly if earnings normalise.

Tracking the Trend

Agencies typically look at leverage ratios across several years to distinguish a genuine, sustained deleveraging trend from a one-off improvement, and often examine the source of funds used for debt reduction as part of that assessment.

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Disclaimer: This article is intended for general informational and educational purposes only and does not constitute financial, credit, investment, or legal advice. Credit ratings are assigned solely by SEBI-registered Credit Rating Agencies (such as CRISIL, ICRA, CARE Ratings, India Ratings, Brickwork, Acuite, and Infomerics) based on their own methodologies, policies, and the information available to them at the time of assessment. FinMen Advisors provides preparatory and advisory support to companies undergoing a rating exercise and does not issue, influence, or guarantee any rating outcome. Readers should exercise independent judgement and consult qualified professionals before making business or financial decisions.