The quantum of business debt downgraded by credit ratings agency Crisil has hit an all-time high of Rs 3.8 lakh crore during FY16, according to a presentation made by the agency today.

The agency added that the debt-weighted credit ratio for this period – the quantum of debt of firms upgraded to those downgraded in the second half of FY16 – stood at 0.2, the lowest reported in the last three years.

The agency added that its outlook for the coming few quarters remained subdued. “We don’t think the environment will change materially in the next few quarters,” Pawan Agrawal, Chief Analytical Officer, Crisil Ratings, said at a conference call with journalists today.

More than half of Rs 3.8 lakh crore figure of debt that was downgraded for FY'16 belonged to firms in the metal sector, which were hit by falling realisation and high debt, the agency said.

“And the second biggest chunk of about a quarter belonged to the infrastructure sector,” it added.

There were 265 defaults in the same period, across various sectors, for a total debt worth Rs 53,000 crore. The bulk of this, however, was a default by a single company – Jindal Steel and Power Ltd – of Rs 32,638 crore.

In the second half of fiscal 2016, the debt-weighted credit ratio - or the quantum of debt of firms upgraded versus downgraded - stood at 0.2, the lowest in the last three years. Also, the credit ratio – the number of rating upgrades to downgrades - stood at 0.76.

Indebted firms in the investment and metal-linked sectors will continue to face considerable headwinds, the agency said, while consumption-linked firms with low leverage will see some uptick in credit quality.

“A broad-based improvement in credit quality will depend on pick-up in investment demand, favourable monsoon and the government's ability to continue to push reforms.”

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