Businesses from covid-hit sectors to benefit more from recast scheme: Crisil
Premium- Half of Crisil-rated mid-sized companies, it said, will be eligible for the restructuring window offered under the Resolution Framework 2.0 announced by RBI
PremiumMUMBAI : Companies with relatively weaker credit profiles, and part of low-resilience sectors are expected to benefit more from Reserve Bank of India’s (RBI) new debt recast scheme, rating agency Crisil said on Thursday.
Half of Crisil-rated mid-sized companies, it said, will be eligible for the restructuring window offered under the Resolution Framework 2.0 announced by RBI. Mid-sized companies referred to here are those with aggregate bank loan exposure of less than ₹500 crore.
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1 min read . 05:45 PM ISTAmid a covid-19 resurgence, the RBI on 5 May announced a slew of measures to mitigate impact of the pandemic on the businesses and individuals, including restructuring window for small businesses.
As per the announcement, borrowers including individuals, small businesses and micro, small and medium enterprises having aggregate exposure of up to ₹25 crore would be eligible for consideration provided they have not availed of restructuring under any of the earlier restructuring frameworks.
“Though localized at the moment, disruptions caused by the second wave of the pandemic have the potential to hit smaller businesses, which were yet to fully recover from the blow dealt by the first wave. The restructuring would entail rescheduling of their financial obligations, thereby easing liquidity pressure," the rating agency said.
Crisil said it rates about 6,800 mid-sized companies, excluding financial sector entities. Of these around 3,500 are small and medium enterprises (SMEs), having bank loan exposure of up to ₹25 crore. About 3,400 of them are standard accounts, which makes them eligible to avail of the restructuring.
Subodh Rai, chief ratings officer, Crisil Ratings Ltd said that RBI’s intervention is timely and companies with weaker credit profiles will benefit more from the restructuring scheme.
“Four out of five companies eligible for restructuring have sub-investment category ratings, indicating their relatively weak ability to manage liquidity shocks. Restructuring 2.0 could provide interim liquidity relief to these companies to cope with near-term cash-flow mismatches," said Rai.
Last fiscal, a third of these SMEs had cushioned their liquidity by availing of the RBI moratorium on bank loans. This relief, Crisil said, was complemented by a bounce back in demand, which limited the number of companies that had opted for restructuring under the Resolution Framework 1.0.
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