 "Credit quality of rated companies moderates in FY16: CARE Ratings")
After witnessing improvement for two years, the credit quality of companies rated by CARE Ratings moderated in 2015-16.
The Modified Credit Ratio (MCR) a ratio of upgrades plus reaffirmations to downgrades and reaffirmations for FY16 dipped to 1.12 from 1.17 for 2014-15.
MCR which helps to measure mobility in ratings had inched from low of 0.81 in 12-13 to 1.03 in 2013-14. It moved further up to 1.17 in FY15, according to CARE Ratings data.
Rating agency said the evaluation of the credit quality shows that the credit quality of the system is stable and has been displaying a fair degree of improvement over the years (in the last 3 financial years).
The sectors that witnessed a significant increase in upgrades and reaffirmations included construction, textiles, general manufacturing, food & food products, electrical equipment, electricity generation, electricity transmission & distribution, real estate activities.
Downgrades were higher than upgrades in case of iron & steel, sugar, cement, hospitality, metals and banks.
More From This Section
Delay in debt servicing were the primary drivers for the downgrades. Decline in margins & profitability, scale of operations, liquidity position, moderation in operational and financial position were some of the other factors that prompted downgrades, CARE said.
The factors that have aided upgrades across sectors were improvement in overall financial position and operational performance along with profitability. Also changes in capital structure and credit profile, change in management and improvement in liquidity position has had bearing on upgrades.