PremiumMumbai: Almost two-third of Crisil-rated mid-sized companies will be eligible for the restructuring window offered under the resolution framework 2.0 announced by the Reserve Bank of India (RBI) for contact-intensive sectors to alleviate liquidity challenges faced by companies in these sectors.
The apex bank on Friday announced a slew of measures aimed at mitigating the pandemic’s impact, raising the aggregate debt threshold for struggling businesses to ₹50 crore from ₹25 crore and provided an on-tap liquidity window of ₹15,000 crore to companies in the contact-intensive sectors.
The rating agency rates about 6,800 mid-sized companies (excluding financial sector entities). Of these 4,700 are small and medium enterprises (SMEs), having bank loan exposure of up to ₹50 crore, and are standard accounts as on March 31, 2021, making these eligible to avail of the restructuring.
As per the earlier aggregate debt threshold of Rs. 25 crore, only half of the crisil-rated mid-sized companies were eligible. But after the revised threshold, almost two-thirds have come under the ambit of the restructuring scheme.
“The RBI’s relaxation in overall bank exposure threshold is timely, as it now increases the coverage of stressed companies that typically have weaker credit profiles. Three out of four companies eligible for restructuring have sub-investment category ratings, indicating their relatively weak ability to manage liquidity shocks. Rescheduling of loan repayments under the restructuring 2.0 window will provide interim relief to these companies against such liquidity shocks." said Subodh Rai, Chief Ratings Officer, Crisil Ratings Ltd,
The rating agency said liquidity window for contact-intensive sectors such as hospitality, travel and tourism, and aviation ancillary services, which have borne the brunt of the second wave of the pandemic, is timely. Companies in these sectors are reeling under a demand shock – with the current quarter estimated to see a contraction of 30-50% sequentially – and will get a huge boost if a large part of the ₹15,000 crore amount is disbursed by banks.
"However, there is a possibility that only large existing borrowers in contact-intensive sectors actually benefit from this on-tap liquidity window as banks may have greater comfort with them. In the current environment, it is possible that a number of banks could be risk-averse and the benefit of on-tap liquidity facility may not, therefore, reach the smaller and lower-rated companies in these sectors fully" the agency said.
"Further clarity will emerge once the banks come out with their updated policies post the RBI announcement. It will monitor the impact of the development on its rated credits on a case-to-case basis" it added.
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