Corporate Downgrade-to-Upgrade Ratio Sees Marginal Increase in FY24, Says Ind-Ra

Mumbai, Apr 1 - In a recent analysis by India Ratings and Research, a slight increase was observed in the corporate downgrade-to-upgrades ratio for FY24 compared to the previous fiscal year. The data revealed that there were 312 upgrades against 114 downgrades in FY24, resulting in a ratio of 0.37 per cent. This figure is a slight rise from the 0.26 per cent ratio recorded in FY23, according to the Mumbai-based rating agency.

Representative image

Arvind Rao, the head of the credit policy group at India Ratings and Research, noted that while there was a marginal increase in both upgrades and downgrades by approximately one percentage point, the overall ratio remains low at 0.37 per cent. This performance is attributed to the ongoing growth narrative within the Indian economy.

Suparna Banerji, associate director at India Ratings and Research, highlighted that the sectors witnessing upgrades included investment, consumption, and services. Conversely, sectors such as textiles and construction experienced downgrades during the same period.

In comparison, Care Ratings, another rating agency, reported a different set of figures for the second half of FY24. It upgraded ratings for 357 entities while downgrading 186, leading to a higher ratio of 1.92 compared to 1.67 in the first half of the fiscal year.

Ranjan Sharma, senior director at Care Ratings, pointed out that downgrades were predominantly seen in chemicals, textiles, and cut and polished diamonds (CPD) sectors. These were primarily due to a slowdown in export demand and competition from China. On the other hand, upgrades were more common in sectors such as hospitality, realty, auto dealerships, and jewellery retailers. This reflects robust consumer spending within these sectors in India.

The contrasting figures between India Ratings and Research and Care Ratings provide a nuanced view of the corporate landscape in India. While there is a general trend towards improvement as indicated by the number of upgrades, certain sectors continue to face challenges that lead to downgrades. This mixed performance underscores the complex dynamics at play within the Indian economy and its corporate sector.