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| With a four to one preponderance of rating upgrades over downgrades, there should be little doubt that more and more companies are looking at better cash flows and much better debt repayment capabilities in the short to medium term. |
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| The macro meaning of across-the-board individual upgrades is that the turnaround in the fortunes of corporate India is broad-based and sustainable. |
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| Faced with a hostile and rapidly changing external environment in the early 1990s, corporate India had retracted into a shell. Falling import margins and the easier entry norms for new players took a toll on the fortunes of existing players. |
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| Revenues took a hit and profits more so. Corporate delinquencies shot up and bad debts piled up at banks counters. No wonder, the ratings action reflected all this stress on corporate balance sheets in the last few years as downgrades outnumbered upgrades consistently. |
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| But the biggest proof of business outlook changing rapidly for the better is in the huge increase in upgrades. As a result of a determined bout of restructuring within, corporate India is now in a much better health. |
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| Balance sheet sizes have been cut to manageable proportions as corporates have junked non-core businesses and have instead sworn to stick to their knittings. |
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| Simultaneously, corporates dropp-ed all diversification and expansion plans as they found more merit in sweating their existing assets. As a result, their requirements for working capital and, with it, interest cost have shrunk rapidly. |
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| Faced with prospects of flat revenue growth, Indian companies have realised the old adage that a rupee saved is a rupee earned. Relentlessly, they wielded a hatchet on all items of avoidable expenditure. |
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| Unfortunately, the process was painful as the first to feel the brunt of this hyper-activity was the labour class. A cut in inventory holdings by the top corporates also meant a slowdown for the small and medium enterprises and the ancillary manufacturers. |
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| But at the end of the whole exercise, corporate India is leaner, and fighting fit. Operating efficiencies and capacity utilisations have improved tremendously, and since this is a slow process of assimilation into the corporate psyche, the full flow of benefits is yet to reach a zenith. |
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| A fortuitous change in the business environment in the interim seems to have helped too. Foremost among these is the platform made available to companies to restructure their debt so as to make the repayment schedule less onerous as also to give them the benefit of falling interest rates. |
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| Another angle to the whole rating story is that the improved business outlook straddles almost all sectors, including manufacturing, finance and the infrastructure sectors. |
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| While the reasons in each case may be different, the fact remains that there are strong common factors such as efficiency gains driving the improved outlook. |
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