The credit ratio or the number of upgrades to downgrades of corporates by rating agency Crisil is marginally up at 1.81 in the second half of 2018-19 as compared to 1.68 in the first half though it has forecast headwinds in the new fiscal year that started today.

There were 594 upgrades and 328 downgrades in the second half, a period marked by rebound in exports, and continued government spending, Crisil said on Monday.

For the full financial year 2018-19, there were 1238 upgrades and 716 downgrades, as compared to 2017-18, which registered 1,402 upgrades and 839 downgrades, according to data with the rating agency, noting that the credit ratio is up. In all, over 11,000 firms are rated by Crisil.

“Nearly 60 per cent of the upgrades were in investment-linked and export-linked sectors,”Crisil said, adding that the positive trend in credit ratio is also consistent with asset quality as seen in the banking sector, where incremental slippages in non-performing assets are estimated to have declined to 3.7 per cent in the second half of the fiscal from 3.8 per cent in the first half.

It has however, maintained a cautious outlook for 2019-20. “While increased private consumption supported by budgetary announcements augur well for the fiscal 2020 credit outlook, some headwinds are gathering,” said Somasekhar Vemuri, Senior Director, Crisil Ratings, adding that it expects moderation in the credit ratio as global growth slackens and pace of government infrastructure spending slows.

Sectors such as construction, engineering, steel, and construction equipment will see only moderate buoyancy while demand in real estate remains weak and refinancing risks also cloud the overall outlook. Competitive pressure is unlikely to ease for telecom operators, it further said. “The liquidity squeeze in second half following default by a large non-bank (not rated by Crisil) has hampered the near- term outlook for select non-banks,”it also noted.

Firms not cooperating

However, as many as 6,400 companies were not cooperating on their ratings in 2018-19, according to the firm as against 3,900 firms in the previous year. But according to Crisil, this could be for various reasons and not just due to worsening financial conditions.

“Some companies may not want a rating as the bankers are comfortable. This could probably be the largest segment, followed by some firms who may have got a rating from another agency,”it noted. It further said that a vast majority of these non cooperating firms have a bank loan rating and very few have a rating for debentures.