India Inc credit profiles benefit from high growth in H1

PTI Mumbai: High economic growth boosted India Inc's credit profile in the first half of FY25, and is set to improve further going ahead, domestic rating agencies said on Tuesday. Crisil Ratings, which rates nearly 7,000 companies, said the 'credit ratio' or the ratio of upgrades to downgrades in its portfolio, improved to 2.75 times in April-September as against 1.79 times in the preceding six months. The largest domestic credit rating agency saw ratings of 506 companies getting upgraded during the six months, while there were 184 downgrades, officials said.

Its Senior Director Somasekhar Vemuri said the agency has a positive credit outlook on India Inc, led largely by the government's infrastructure investment and private consumption, which is the driving force for the economic growth estimated at 6.8 per cent in FY25. Over 38 per cent of the rating upgrades were of infrastructure or related sectors in the April to September period (H1) of FY25, achieved on the back of strong sponsors and lowerthan- expected debt, the agency's Managing Director Subodh Rai told reporters. Interestingly, if one were to look at the debt weighted credit ratio, which takes into account the underlying outstandings of companies rather than the number of entities, the ratio zoomed to 5.91 in H1 from 1.28 in the preceding six months as the number of upgrades were higher with corporate having larger exposure.

The agency said private sector capital expenditure is set to rise 10-12 per cent in FY25 over the Rs 4.3 lakh crore in FY24 on the back of the headroom that corporates have, courtesy lean balance sheets, possibilities of interest rate cuts and rising capacity utilisation. The capex intensity measured by analysing the actual capital expenditure to operating profits is still moderate at 50 per cent as against the high of 72 per cent seen in FY16 before demonetisation, Crisil said. Over half of the capital expenditure comes from oil and gas refining/ marketing, oil and gas exploration and production, primary steel, aluminium, cement sectors, while the infras tructure push from the government is expected to ensure that traditional industries such as cement, primary steel and aluminum continue investing in FY25 and FY26, it said.

On the credit quality outlook, it said the fast moving consumer goods sector is showing positive movement given the expected increase in rural demand, while information technology, cement and fertilisers have moved downwards to 'favourable' from 'strong' bucket.