CRISIL Ratings said less than one per cent of the eligible companies, which have a bank loan exposure of up to ₹50 crore and are standard accounts as on March 31, 2021, in its ratings portfolio opted to restructure their debt under the Resolution Framework 2.0 of the Reserve Bank of India (RBI).

The agency reasoned that the tepid response — despite an intense and more virulent second wave of the Covid-19 pandemic — reflects the positive turn in demand outlook, and anxiety about negative stakeholder perception of restructured companies.

With the window for restructuring under the Resolution Framework 2.0 of the Reserve Bank of India closing on September 30, there was minimal utilisation of it as anticipated, CRISIL Rating said.

As per the agency’s proprietary framework that assesses the extent of recovery in demand and the resilience of sectors, 37 sectors (out of 43 that account for 76 per cent of the total corporate debt rated by CRISIL) have seen demand rebounding to, or near, the pre-pandemic levels.

It observed that the impact of the second wave on the cash flows of companies has been relatively short-lived due to localised and less-stringent restrictions compared with the first wave.

Subodh Rai, Chief Ratings Officer, said: “Around 88 per cent of the rated debt under the framework is in sectors where demand has or is expected to fully recover in current fiscal to the pre-pandemic levels. These include essentials such as FMCG, pharma and telecom, and infrastructure-linked sectors such as cement, power, roads and construction. Such a broad-based recovery has helped reduce the need for restructuring among corporates in CRISIL’s rated portfolio.”

Govt support

Also, the continuation of strong government support — such as the expansion of the scope of the Emergency Credit Line Guarantee Scheme (ECLGS) and its extension till March 31, 2022 — has helped companies manage temporary liquidity disruptions.

This is especially true for micro and small enterprises, which are experiencing relatively higher stress. ECLGS reduces the need for them to go for Restructuring 2.0. “The impact on long-term credit history also kept away many companies. That’s because, lenders would classify their accounts as ‘restructured’, which would impair their ability to raise debt in future,” opined the agency.

None of the CRISIL-rated companies opting for Restructuring 2.0 had a rating in the investment-grade category (‘BBB’ or higher), where credit profiles are relatively stronger.

Even among the companies in the sub-investment grade category (‘BB’ or lower) — where weaker credit profiles abound — a significant 98 per cent did not seek restructuring, the agency said.

CRISIL underscored that its findings are limited to companies (largely mid- to large-sized) rated by it. Hence, they may not reflect the predicament of micro and small enterprises, very few of which are rated in any case, it added.

The agency observed that in the road ahead, a third wave of the pandemic, if it lands, and its impact will bear watching.