Sharp recovery in corporate credit quality of the industry to 2.83x in FY22 - PMI- Mar'22 - Acuité Ratings

Acuité has undertaken a comprehensive analysis of the CRA industry rating migration data for FY22. There is a very significant recovery in the Credit Ratio (CR) of the industry to 2.83x in FY22 from 1.09x in FY21 and 0.91x in FY20 i.e. the pre-pandemic year respectively.

The number of upgrades have climbed up sharply by 58.8% in the previous year vis-à-vis FY21 while the downgrades have reduced by 39%. Further, as compared to the pre-pandemic FY20, upgrades have increased by 25.2% while downgrades have more than halved from those levels.

Says Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research, "The sharp and broad based improvement in the credit ratio in FY22 was not really surprising given the visible domestic economic recovery particularly after the disastrous second pandemic wave in Apr-May'22. With limited impact of the Omicron wave, the operating environment for the contact intensive sectors have also seen a healthy revival in Q4FY22. We expect the momentum of upgrades to continue in FY23 amidst government's strong thrust on infrastructure segment, solid coverage on vaccination, moderate recovery in rural consumption and the full play out of pent-up demand. However, a moderation of the record high credit ratio is on the cards with the headwinds from the Russia-Ukraine crisis, the high crude oil prices and higher than expected inflationary pressures which are likely to have an impact on the operating margins in the corporate sector."

Source : Equity Bulls

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AcuiteRating CorporateCreditQuality Recovery PMI March2022