A first in 10 years: No downgrades, defaults in first half

Crisil, the credit rating agency, has said that for the first time in 10 years, it did not have to downgrade or dub as potential defaulter a company, during the first half of a fiscal (April-September 2004). This was owing to improved credit profiles across manufacturing, financial services and infrastructure sectors.

The rating agency's half-yearly round-up of 430 companies said aggressive financial and operational restructuring over the last few years has improved the manufacturing sector's competitiveness across a broad spectrum of industries.

Crisil's defaulters list includes about 100 companies, with the addition of two companies each in 2003-04 and 2002-03, eight in 2001-02, 11 in 2000-01 and 15 in 1999-2000.

"Zero defaults combined with the improving credit ratio signal a continuing uptrend in the Indian corporate sector," said Crisil chief rating officer Roopa Kudva.

Crisil's rated portfolio included 260 manufacturing firms, 100 financial services firms and 70 infrastructure firms.

The improving business fundamentals and strengthening balance sheets "" the key drivers of most upgrades in the manufacturing and infrastructure sectors "" are expected to maintain the trend in the second-half of 2004-05, said Prasad Koparkar, head, rating criteria and product development at Crisil.

The upgrades list shows companies from the packaging, plastics, automobiles, pharmaceuticals, fertiliser and other diversified industries, demonstrating that the improvement in credit profile is broadbased.

The rising inflation has caused continued decline in real interest rates, which implied lower borrowing costs for corporates in relation to product prices and in turn a positive impact on their profitability, the analysis said.