The continuing resurgence in Covid-19 cases and proliferation of localised restrictions could dampen the pace of recovery for the Indian corporate sector. However, the percentage of rated portfolio that would be severely impacted by the second wave would be much lower than that in 2020, according to ICRA.
At the same time, the rating agency expects contact-intensive sectors such as travel and hospitality, and retail to continue to face severe disruptions even in the second wave, and their recovery timelines to be further pushed back by these rising infections.
According to Ramnath Krishnan, President Ratings, ICRA Ltd: “In line with the rebound in economic growth, the credit ratio (ratio of upgrades to downgrades) recorded an improvement after November 2020. With the fresh uncertainties wrought by the second wave of the pandemic, and the likelihood of additional support measures being limited, the credit ratio is now likely to stall."
“Nevertheless, we estimate the impact of the second wave of the pandemic on many sectors to be lower than the first – an advantage from the less widespread and stringent lockdowns as of now (vis-à-vis the prolonged nationwide lockdown last year). Other supportive factors include lower global disruptions, absence of pricing pressures on commodity producers, increased digitisation and availability of additional funding lines,” Krishnan added.
K. Ravichandran, Deputy Chief Ratings Officer, ICRA Ltd said six sectors, namely, aviation; hotels, restaurants and tourism; media and entertainment-exhibitors; microfinance institutions; real estate-retail; and retail, will be at high risk from the second pandemic wave, much lower than in 2020.
"We expect the percentage of ICRA-rated portfolios that would be severely impacted by the second wave to be limited to 4 per cent, much lower than the 17 per cent seen last year. The entities in the riskier categories are likely to continue to face negative rating pressure compared to the average for the entire ICRA portfolio, as seen in the last fiscal," he said.