The pressure on the credit quality of Indian companies has eased in the current financial year, after reaching its peak in the second half of 2008-09.
Rating agency CRISIL says improved access to funds at reasonable rates has helped, as has an increase in profitability over the past two quarters.
This is reflected in CRISIL having upgraded its ratiings on 13 companies in the four months through July 2009, and downgraded 90. In contrast, in the six months ended 31 March 2009, it downgrade 81 ratings, while upgrading only one.
This indicates that although the pressure on credit qualitycontinues, its intensity has abated. In October 2008, CRISIL had identified access to funds as one of the key monitorables for corporate credit quality. Since April 2009, Indian companies' access to funds has improved considerably, largely driving the easing in credit quality pressure.
''Companies have benefited from the accommodative stance of monetary policy,an increased appetite for risk in international capital markets, and improved sentiment in the Indian equity market,'' says Raman Uberoi, senior director,CRISIL Ratings.
The interest burden on companies has reduced and the total interest expenses for 403 non-financial companies in the S&P CNX 500 index dropped by 5 per cent in the March 2009 quarter, and by another 12 per cent in the June 2009 quarter, compared with the respective preceding quarters.
This was driven by three factors - firstly, interest rates have eased even as working capital requirementsreduced with commodity prices. Secondly, Indian companies' borrowings in the global markets in June 2009 were the highest in any month since September 2008 and are cheaper than rupee-denominated loans.