 "The outlook for credit rating this year is positive: Roopa Kudva")
Following a slew of rating downgrades during the slowdown, the prospects of Indian companies are now looking up. Roopa Kudva, managing director and chief executive of CRISIL Ltd, tells Abhijit Lele defaults are on the decline and revenue growth is improving, providing ground for the credit rating outlook to be positive this year. Edited excerpts
The new government seems to be settling and the business and market sentiment is rising. What is the outlook on corporate credit rating this year?
The overall outlook for credit rating in 2015 is positive. Revenue growth is expected to be higher and the pace of corporate defaults is slowing.
There is a turnaround in the trend. Credit quality has shown signs of a recovery. Now, rating upgrades are ahead of downgrades. During the first half of this financial year, the number of upgrades was 741, compared with 451 downgrades. In 2013-14, we had downgraded the ratings of 1,165 firms and upgraded those of 921.
How will corporate revenue growth fare?
In 2013-14, revenues grew nine per cent. This financial year, these are estimated to grow 12-13 per cent and by a couple of points more in FY16.
How are the sectors stacked in terms of growth? What will drive this growth?
Broadly, we are looking at export-linked sectors, the consumer segment, infrastructure and others such as telecom, real estate and hospitality. In the exports segment, information technology will benefit from a recovery in the US. The second key sector is pharmaceuticals — here, we’re looking at a slowdown, as the US Food and Drug Administration has issued alerts on some units.
What about the textile sector, which has a substantial share in India’s exports?
We have a positive outlook on the garments sector due to a host of factors such as a recovery in the US economy, a steady performance in the EU and a shift in orders from Bangladesh to India. However, the yarn/spinning sectors will be under pressure due to a slowdown in demand from China.
What will the consumer segment fare?
The fast-moving consumer goods segment and the demand for cars, two-wheelers and tractors have seen growth. Urban demand will be strong. Demand in the light commercial vehicles category is subdued.
Those in the infrastructure segment are mired by host of issues.
The sector will see challenge, with slow execution of projects. The balance sheets of many entities are stretched. The power sector environment depends on how the issue of coal linkages is resolved. In the telecom sector, we have seen a favourable pricing environment after a long time. Competition has declined and there is a growing shift from voice to data, where realisations are high.
What about the real estate sector, including housing?
It remains among those on the watch list (perceived risk remains high). Many real estate firms have borrowed a lot. There is oversupply in Mumbai and the National Capital Region. Lease rentals continue to be low.
Interest rates are softening. How will that translate into gains for industry and the economy?
It will improve demand for cars, trucks and housing, giving a push to economic growth. Also, it will help companies correct balance sheets.
How was 2014 for CRISIL?
For business within India, a large part of the revenue was driven by expanding the market. There was significant growth in the small and medium enterprises (SMEs) rating category. The SME customer count is about 60,000, providing a business opportunity for decades. We are expanding product services such as analytics for wealth management.
Abroad, the company is repositioning itself from being just a knowledge process outsourcing outfit to marketing products under our own brand, backed by strong intellectual property.
The new government seems to be settling and the business and market sentiment is rising. What is the outlook on corporate credit rating this year?
The overall outlook for credit rating in 2015 is positive. Revenue growth is expected to be higher and the pace of corporate defaults is slowing.
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Amid an economic slowdown and high interest rates, the past few years have seen a spate of rating downgrades. What shifts have you seen in recent months?
There is a turnaround in the trend. Credit quality has shown signs of a recovery. Now, rating upgrades are ahead of downgrades. During the first half of this financial year, the number of upgrades was 741, compared with 451 downgrades. In 2013-14, we had downgraded the ratings of 1,165 firms and upgraded those of 921.
How will corporate revenue growth fare?
In 2013-14, revenues grew nine per cent. This financial year, these are estimated to grow 12-13 per cent and by a couple of points more in FY16.
How are the sectors stacked in terms of growth? What will drive this growth?
Broadly, we are looking at export-linked sectors, the consumer segment, infrastructure and others such as telecom, real estate and hospitality. In the exports segment, information technology will benefit from a recovery in the US. The second key sector is pharmaceuticals — here, we’re looking at a slowdown, as the US Food and Drug Administration has issued alerts on some units.
What about the textile sector, which has a substantial share in India’s exports?
We have a positive outlook on the garments sector due to a host of factors such as a recovery in the US economy, a steady performance in the EU and a shift in orders from Bangladesh to India. However, the yarn/spinning sectors will be under pressure due to a slowdown in demand from China.
What will the consumer segment fare?
The fast-moving consumer goods segment and the demand for cars, two-wheelers and tractors have seen growth. Urban demand will be strong. Demand in the light commercial vehicles category is subdued.
Those in the infrastructure segment are mired by host of issues.
The sector will see challenge, with slow execution of projects. The balance sheets of many entities are stretched. The power sector environment depends on how the issue of coal linkages is resolved. In the telecom sector, we have seen a favourable pricing environment after a long time. Competition has declined and there is a growing shift from voice to data, where realisations are high.
What about the real estate sector, including housing?
It remains among those on the watch list (perceived risk remains high). Many real estate firms have borrowed a lot. There is oversupply in Mumbai and the National Capital Region. Lease rentals continue to be low.
Interest rates are softening. How will that translate into gains for industry and the economy?
It will improve demand for cars, trucks and housing, giving a push to economic growth. Also, it will help companies correct balance sheets.
How was 2014 for CRISIL?
For business within India, a large part of the revenue was driven by expanding the market. There was significant growth in the small and medium enterprises (SMEs) rating category. The SME customer count is about 60,000, providing a business opportunity for decades. We are expanding product services such as analytics for wealth management.
Abroad, the company is repositioning itself from being just a knowledge process outsourcing outfit to marketing products under our own brand, backed by strong intellectual property.