Financial Daily from THE HINDU group of publications
Thursday, May 04, 2006
Financial Daily from THE HINDU group of publications Thursday, May 04, 2006 |
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Corporate - Credit Rating Creditworthiness sliding, says Crisil Our Bureau
Mumbai , May 3 Led by the manufacturing, financial services and infrastructure sectors, Indian companies have begun to show a downward movement of creditworthiness, says Crisil Ratings. The modified credit ratio (MCR) of the rating agency has shown a sharp decline for the first time in three years. The Crisil MCR has declined from an all-time high 1.16 in 2004-05 to 1.03 in 2005-06. The financial sector, though, is expected to show a stable rating owing to support from the Government and foreign parent companies. The pressure on the credit quality of Indian companies is likely to be gradual. "Crisil does not expect this pressure to result in significant downward rating movements in the next 18 months," said Mr G.V. Mani, Director Rating Criteria and Product Development, in a Crisil release here on Wednesday. The hike in oil prices, high real interest rates, debt-funded capital expenditure will be the major factors affecting the creditworthiness of Indian companies, over a period of time. Index of Industrial Production (IIP), related to MCR, has also shown a decline in three years, from 8.5 per cent to 8 per cent.
Rating outlooks
During this period, real interest rates, inversely related to MCR, have shown an increase from 0.26 per cent to 2.68 per cent, affecting the performance of Indian companies in the global markets. Rating outlooks by Crisil have indicated that over two per cent of its outstanding long-term ratings carried negative outlooks compared to complete absence of negative outlooks at the end of 2004-05. Similarly, the positive outlooks have dipped from over seven per cent of outstanding long-term ratings at the end of 2003-04 to approximately two per cent at the end of 2005-06.
More Stories on : Economy | Credit Rating
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