• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy
• Books

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Our Bureau

Mumbai, April 1 Crisil downgraded ratings on 84 entities in the 2008-09 fiscal, while upgrading those on only two.

In 2007-08, there were 14 downgrades and nine upgrades.

A slowing economy and a sharp downturn in the investment environment, particularly during the second half of 2008-09, have affected Indian companies’ credit quality, said a report released by the rating agency.

Of the 84 entities whose ratings were downgraded in 2008-09, 15 were from the automobile and automotive ancillaries industries, 14 from the financial sector, eight from the textiles industry, and seven each from the metals and mining industry and the construction and real estate industry.

As many as 68 of the 84 downgrades were driven by lack of access to adequate funding or by a sharp decline in demand or both, the Crisil report said.

Three macro factors that are the most significant drivers of credit quality over the near term include access to funding at reasonable rates, the intensity of the demand slowdown and movements in foreign exchange rates.

After three years of no defaults, Crisil’s rated portfolio registered 13 defaults in 2008-09, though the base was much larger. As on March 31, Crisil had ratings outstanding on about 1,600 entities, up from about 400 a year ago.

Most entities that defaulted on their debt obligations in 2008-09 did so after facing a severe strain on their working capital positions because of the economic slowdown. Of the 13 defaults in 2008-09, seven were in the textile industry and three were suppliers to the real estate industry.

CRISIL expects severe credit quality pressure to continue in the textile and real estate industries; suppliers to the real estate industry are vulnerable to delayed payments and write-offs.

Indian companies continue to face pressure on their credit quality as the prospect of acceleration in economic growth remains uncertain.

Crisil believes that there may be more downgrades over the course of the next year, unless there is a quick and sharp turnaround in the domestic and global economies.

While governments and central banks all over the world have undertaken numerous fiscal and monetary measures to stimulate growth, the impact of these steps will be visible over the next six months, and will be the key to monitor trends in credit quality.

More Stories on : Stocks | Credit Rating

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2009, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line