India Inc’s credit quality showed mixed trends in the second half (H2) of FY25, with Crisil Ratings and ICRA reporting a dip in their credit ratios, while CareEdge Ratings recorded a notable improvement, driven by strengthening domestic business fundamentals.
🔹 Crisil Ratings: Moderate Dip but Positive Outlook
- Credit Ratio: Slightly declined to 2.64x in H2 FY25 from 2.75x in H1 FY25.
- Reaffirmation Rate: Increased to 83% (up from 80%), surpassing the 10-year average of 82.5%—signaling a stabilizing credit environment.
- Upgrade Rate: Dropped to 12.2% from 14.5%, still above the decadal average of 11%.
- Downgrade Rate: Improved to 4.6% (from 5.3%), better than the 10-year average of 6.4%.
Sector Highlights:
- Upgrades: Driven by infrastructure-linked industries like construction, engineering, capital goods, and secondary steel.
- Downgrades: Mostly impacted export-oriented sectors such as specialty chemicals, cotton spinning, and home furnishings, due to global uncertainties.
Subodh Rai, MD at Crisil Ratings, projected that:
“Urban consumption, tax cuts, and easing interest rates will support growth, while India Inc’s strong balance sheets (median gearing at 0.5x) offer a cushion against external shocks.”
🔹 ICRA: Credit Ratio Sees Drop, but Debt Discipline Continues
- Credit Ratio: Declined to 1.80x in H2 FY25 from 2.20x in H1.
- Drivers: Continued strength in balance sheets across Corporate India, with operating profits growing at a CAGR of 12%, and debt increasing by only 4% over the past decade.
K. Ravichandran, EVP & Chief Rating Officer at ICRA, stated:
“Improved credit profiles are enabling corporate India to weather headwinds like commodity inflation, higher interest rates, and weak demand.”
A noteworthy trend is that 16% of rating upgrades were linked to lower project risks and refinancing, especially in the power, road, and real estate sectors—up from a five-year average of 10%.
🔹 CareEdge Ratings: Strong Recovery in Credit Ratio
- Credit Ratio: Rose to 2.35x in H2 FY25 from 1.62x in H1.
- Upgrade-Downgrade Count: 386 upgrades vs. 164 downgrades.
This rebound is attributed to:
- Improving business fundamentals in mid-sized, domestically focused companies
- Better performance in the manufacturing and services sectors
Sachin Gupta, Executive Director and Chief Rating Officer, noted:
“Despite global turbulence, the resilience of India Inc. shines through, although challenges still lie ahead.”
Disclaimer: This article is not authored or drafted by any employee of FinMen Advisors. The information presented is entirely sourced from the above news link. FinMen Advisors is not responsible for the accuracy, completeness, or reliability of the information.
