Money & Banking

Rating downgrades on the rise since pandemic: ICRA

Our Bureau Mumbai | Updated on June 12, 2020 Published on June 12, 2020

315 negative rating actions on non-financial entities between March 1 and May 15

Rating agency ICRA on Thursday said the pace of rating downgrades has significantly increased in the wake of the Covid-19 pandemic and economic downturn.

“Of the 315 negative rating actions taken on non-financial sector entities in the period from March 1, 2020 to May 15, 2020, a majority were attributable to the pandemic outbreak,” it said.

Nearly 150 of the negative rating actions have been downgrades, while 122 ratings have undergone a change in outlook to negative. Another 43 entities were placed on Ratings Watch.

“However, negative rating actions have so far impacted only 9.6 per cent of the rated portfolio of corporate sector entities,” ICRA further said.

Meanwhile, upgrades have largely dried up in this period of uncertainty.

Shamsher Dewan, Vice President-Corporate Ratings, ICRA, said there has been a need to review the creditworthiness of rated entities, especially in sectors hit hard by the pandemic.

“With the impact of the pandemic across sectors being multifold, including slowdown in domestic demand and the global economy, supply chain disruptions, foreign exchange rate fluctuations, and commodity price impact, among others, and the general uncertainty with regard to timing of revival, negative rating actions have increased, while upgrades have dried up,” he noted.

Of the top 10 sectors which witnessed negative rating action since March 2020, a large proportion was those that were categorised as high-risk by the agency. These include sectors like aviation, hotels and restaurants, retail, and ports.

Several low-risk sectors like FMCG, sugar, seeds, and utilities did not see any negative rating action during this period, despite a large portfolio-base (100+ entities), highlighting their relative resilience to the pandemic, ICRA further said.

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Published on June 12, 2020
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