Icra upgrades on the rise in '05

For the first time in its history rating agency Icra has witnessed upgrades exceeding downgrades in 2005.

The severity of downgrades during 2005 was also low with the downgraded ratings remaining within their respective broad categories.

Unlike in 2004, when certain downgrades breached their respective categories to move into lower ones, 2005 did not see any investment-grade rating moving into a lower category despite downgrading.

Icra said the ratio between rating downgrades and upgrades fell to 0.33 in 2005, from 1.2 the previous calendar year, as the number of downgrades saw a sharp decline over the period, even as the number of upgrades saw a marginal rise. This is the first time in the rating agency's history that the ratio has fallen below one.

The performance of Icra-assigned ratings in 2005, marks a continuity with the trend since 2002, when the improvement in business environment was reflected in a decline in the number of ratings that were downgraded, and an increase in the number of upgrades.

The continuity of the positive trend in rating performance reflects the favourable economic environment prevailing and the improvement in corporate credit quality across various industries, the rating agency said.

In 2005, the number of rating upgrades (in the long and medium-term categories), by Icra increased to 12 from 10 in the previous year.

The business profiles of the entities whose debt instruments were upgraded are fairly well spread across sectors such as financial services, power, cement, coal, steel, telecommunications, diversified and real estate sectors.

Significantly, in 2005, one of the entities was upgraded from the non-investment category to the low investment-grade.

The number of rating downgrades fell sharply to four in 2005 from 12 in the previous year. None of the investment-grade ratings fell into the non-investment-grades in 2005.

While two of the rating downgrades in 2005 were within the non-investment-grade, the other two were downgrades within the adequate-credit quality bracket. The downgraded entities were from the footwear, tractor, engineering, and construction sectors.