Debt downgrades soar a whopping 70% to Rs 2.9 trillion in H1: Icra

Mumbai: Debt downgrades jumped a whopping 70 per cent to Rs 2.9 trillion in the first half of the fiscal, with half of the slippages coming in from the banking and financial sector, says a report.

Ratings agency Icra has upgraded 304 entities and downgraded 261 instruments during the April-September period of FY18, closely resembling the corresponding averages for the preceding two half-fiscals.

"At Rs 2.9 trillion, the volume of debt downgrades in the first half was over 70 per cent higher than the downgrades over the same period a year ago," Icra chief rating officer Anjan Ghosh said.

"Of the total debt downgrades, almost 50 per cent are from entities belonging to the banking and the financial sector," Ghosh added.

For non-financial sector, the aggregate volume of the debt downgraded was over 30 per cent higher than a year ago.

According to Icra's Jitin Makkar, top 10 percentile of non-financial sectors entities downgraded accounted for around 50 per cent of the total debt downgrades in 2016-17.

"This figure stood much lower at around 30 per cent in the first of the current fiscal, signifying that credit quality pressures have become relatively more widespread, and are not just restricted to a limited set of entities," Makkar said.

Ferrous metals, banking and finance, and telecom were some sectors where the number of downgrades was higher than upgrades. Select sectors where it was the other way around were renewable energy, textiles, seafoods, petrochemicals and polymers, the report said.

Among the non-financial sectors, the largest contributors to the downgrades were telecoms, power and ferrous metals.

Although the volume of the debt upgraded too increased, it trailed the quantum of the downgrades in H1 FY2018 by a factor of 2.7 times.

Even on excluding the top five percentile of entities whose ratings were either upgraded or downgraded, the debt- weighted credit ratio for ratings fell to 1.0 times from 1.7 times indicative of the continuing pressures on credit profile.