Rating agency Crisil said that the credit ratio, or the number of upgrades to downgrades, at 1.81 in the second half of fiscal 2019, was marginally up from 1.68 in the first half.

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

Rising with asset quality

“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 declined sharply to 3.7% in H2, compared with 3.8% in H1 and an average of 6% in fiscal 2017 and 2018,” Crisil said. Another rating agency ICRA, has upgraded 513 entities in FY19 as compared to 389 downgrades. However, ICRA said its rating actions in FY2019 indicated a persistent pressure on the credit quality of corporate India.

“This is reflected in the rating drift of ICRA-assigned ratings, calculated as the average upgraded notches per rated entity, minus the average downgraded notches per rated entity (an indicator of the extent and the direction of rating changes), descending to -12% in FY2019,” ICRA said.

ICRA said the ratio was not only higher than the past five-year average of -8%, but was also higher than the rating drift of -11% experienced in FY2018.

The aggregate volume of the debt downgraded by ICRA in FY2019 stood at ₹3.2 lakh crore higher by 10% than that downgraded in the preceding fiscal.

The downgrades by ICRA included that of Infrastructure Leasing and Financial Services Limited (IL&FS) along with other IL&FS group entities.IL&FS was not rated by Crisil.

“Notably, the downgrades were driven mostly by firm-specific concerns emanating from deterioration in business profiles or worsening of capital structures or increased liquidity pressures on the rated entities,” said Jitin Makkar, Head — Credit Policy, ICRA.