Heavy Downfall in Credit Ratings of Many Companies – Hits 3 Year High

This year debt instruments of 116 companies were downgraded and those of 55 firms were upgraded by the credit rating agencies, reports Business Standard.

At the end of 2016, 97 companies had a junk rating as per the Securities and Exchange Board of India (SEBI). For the period January-May, 42 firms’ debt instruments were rated in the default category. The default ratings have increased to its highest in three years with the addition of these 42 firms.

The report said that the debt of all companies listed on BSE and rated by five credit rating agencies was considered. These five credit rating agencies are ICRA, CARE, CRISIL, India Ratings and Moody’s.

The last cycle of downgrades was started in 2009-2010 after the global recession triggered by the collapse of Lehman Brothers.

The slow pickup in demand and flat earnings in the past few years have deteriorated the financials of Corporate India putting them in a precarious condition.

The sharp increase in non-performing assets (NPAs) has crippled the banking sector in the past few years. Many PSU banks had seen a significant fall in credit growth.

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