Crisil upgraded more companies than it downgraded in 2018-19

Ratings firm Crisil has warned of some headwinds ahead in the credit outlook on account of global slowdown despite an improvement in its ratings upgrades in 2018-19.The rating agency upgraded 1,238 ratings in 2018-19 versus 716 downgrades during the year compared to 1402 upgrades and 839 downgrades in 2017-18. Its credit ratio or the ratio of upgrades to downgrades at 1.72 in FY’19 was higher than the ratio of 1.67 in FY’18.The credit ratio for the first half of FY’19 at 1.81 is up from 1.68 in the first half, according to a release by the ratings firm“While increased private consumption supported by budgetary announcements augur well for the fiscal 2020 credit outlook, some headwinds are gathering” said Somasekhar Vemuri, Senior Director, CRISIL Ratings.” We expect moderation in the credit ratio as global growth slackens and pace of government infrastructure spending slows,’’Slower growth in government spending on infrastructure also means investment-linked sectors such as construction, engineering, steel, and construction equipment will see only moderate buoyancy. Demand in real estate remains weak and refinancing risks also cloud the overall outlook. And competitive pressure is unlikely to ease for telecom operators with the newest entrant expanding into more segments.Credit ratio will moderate. But it will still remain above one because of an increase in private consumption supported by budgetary announcements. Stable operating cycles, and leaner balance sheets NPAs are estimated to decline in current fiscal; Proportion of SMA-2 accounts has moderated significantly. Moderation in slippages coupled with recoveries from IBC backed resolutions will play key role in NPA reduction.Gross NPAs (system) expected to decline to 8.5% in fiscal 2020 from 10% in fiscal 2019.Risk of an El-Nino event affecting monsoon and its impact on rural incomes. Electoral outcomes leading to any change in policy towards capital spending and fiscal stance. Lower than expected growth for domestic economy.The liquidity squeeze in H2 following default by a large non-bank (not rated by CRISIL) has hampered the near-term outlook for select non-banks, even as most others have already reoriented their resource profiles by reducing reliance on short-term borrowings and focusing on asset-liability maturity management. Growth for non-banks will be lower than that seen before September 2018 as they seek to conserve liquidity.

from Economic Times https://ift.tt/2V950DP