India Inc credit ratio rises to 2.18 in H1 FY27: Crisil Ratings

Mumbai, Oct 6 (TNT): India’s corporate credit quality improved in the first half of the current fiscal, with the Crisil Ratings credit ratio rising to 2.18 times from 1.50 times in the second half of the previous fiscal, according to a report released by Crisil Ratings.

The credit ratio, which measures the proportion of rating upgrades to downgrades, reflected 464 upgrades against 213 downgrades during the period.

The reaffirmation rate remained around 81 per cent, indicating broadly stable corporate credit quality amid geopolitical uncertainty and supply chain disruptions, the report said.

The upgrade rate stood at around 13 per cent, marginally above the decadal average of 11 per cent.

Nearly 40 per cent of the upgrades came from infrastructure and allied sectors, including roads, renewable energy, capital goods and secondary steel, supported by sustained government infrastructure spending.

Crisil Ratings said Indian companies had demonstrated adaptability to the prolonged West Asia conflict and related trade and supply chain disruptions by diversifying sourcing channels, reconfiguring logistics networks and selectively passing on higher costs.

Corporate balance sheets also remained relatively strong, with the median debt-to-equity ratio at around 0.5 times.

Crisil Ratings Managing Director Subodh Rai said strong balance sheets, operational adaptability, domestic demand, recovering exports and targeted policy support had helped companies manage cost and cash-flow pressures.

Of the 34 sectors assessed for exposure to the West Asia conflict, representing around 65 per cent of rated corporate debt, only three sectors carried a negative or moderately negative credit quality outlook this fiscal, accounting for less than one per cent of rated corporate debt.

Diamond polishing, polyester textiles and specialty chemicals remain under pressure.

Weak export demand and competition from lab-grown diamonds are affecting diamond polishers, while higher crude-linked input costs and import competition are weighing on polyester textiles.

Specialty chemicals face pressure from low-priced Chinese supplies, particularly in export markets.

Crisil Ratings said three sectors earlier identified as affected — ceramics, flexible packaging and large market-share airlines — had moved to a stable credit quality outlook, supported by factors including improved operating conditions, steady demand and strong balance sheets.

The rating agency also flagged weather-related risks, with cumulative rainfall around 12 per cent below normal as of September 29.

It said the impact on overall rural demand was expected to remain limited this fiscal, although persistent weather anomalies and their impact on the winter crop could affect rural incomes over the medium term.

In the financial sector, bank credit growth is expected at 14.5-15.5 per cent this fiscal, with MSME and retail lending likely to remain key growth drivers.

Gross non-performing assets are expected to remain below two per cent by the end of the fiscal. Non-banking financial companies are expected to record 18-19 per cent growth in assets under management.

Overall, Crisil Ratings expects corporate credit profiles to remain stable, supported by favourable growth prospects, robust capital positions and steady profitability.