Tuesday, April 9, 2013

Corporate India's Woes

I was struck by this graphic of the changes in the distribution of ratings of India's business firms done by CRISIL. In many ways, it is a nice reflection of the fortunes of corporate India during the period. Clearly ratings downgrades continue to outnumber upgrades.

Construction and infrastructure sector firms are the worst affected, with the highest ratings downgrades and corporate debt restructurings. The graphic shows that a very high proportion of firms from these sector have suffered ratings downgrades and their credit ratio (ratio of upgrades to downgrades) is extremely low.

Thanks to declining economic growth, project delays, cost over-runs, high interest rates, and slow revenues growthtotal restructured loans crossed Rs. 2.27 trillion, or 4.4% of the total loans given by Indian banks, and is rising. This may be an underestimate given the bilateral restructurings and the true estimate may be around Rs 4 trillion. Iron and Steel (23%), infrastructure (9.65%) and power (8.13%) were top of the pile in the Rs 77,101 Cr worth loans restructured in 2012-13.

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