India Ratings and Research (Ind-Ra) has published the January 2021 edition of its research and ratings compendium. Following are some of the key topics included in this edition:
1. A summary of the rating actions taken during January 2021
2. The analysis of Economic Survey 2020-21 and FY22 Union Budget
3. The impact of potential loan waivers in Assam and West Bengal on micro finance institutions
4. The impact on construction players of record award pace of national highways in FY21 along with government measures
5. The recovery in residential real estate market in 3Q which could sustain in 4QFY21
6. The impact of high iron ore prices due to supply side constraints
Rating action highlights: During January 2021, for the first time in the current fiscal, corporate rating upgrades outpaced rating downgrades - 16 ratings were upgraded while nine were downgraded. The rating upgrades were supported by strong profitability, and a likely sustained improvement in the leverage over the medium term. Of the total number of reviewed ratings in January 2021, overall positive rating actions (including outlooks and rating watch) were at 22 and negative rating actions were at 14.
The Essentials bucket saw the highest proportion of positive rating actions. 41% of the issuers from this bucket saw a ratings upgrade which include issuers belonging to pharmaceutical, utilities and media. Negative rating actions in this bucket were minimal and only seen for issuers witnessing deterioration in its operational profile and weak liquidity.
The agency had taken positive rating actions on issuers belonging to metals & mining, building materials & construction and forest materials in the Industrial bucket, to reflect the higher-than-expected improvement in their profitability or faster-than-expected balance sheet deleveraging, leading to an improvement in their liquidity or due to better-than-expected order executions, leading to improved working capital management. Negative rating actions were seen for issuers belonging to the construction and machinery sectors, including one default due to a firm-specific reason and not industry related.
The Non-Discretionary bucket saw the largest number of downgrades, majorly due to earnings and working capital pressure or disruptions in operations due to COVID-19 related challenges, leading to a stretched liquidity position. Positive rating actions for this bucket were seen for issuers in the utilities, infrastructure and food & beverage sectors, led by an improved operational performance or a better-than-expected improvement in credit profile or acquisition by a stronger parent. On the other hand, the Discretionary bucket continued to see high negative rating actions owing to business/revenue impact due to COVID-19 related challenges in the textile, real estate and consumer durables sectors while, the positive rating actions have remained minimal.
The agency has been continuously monitoring the on-ground situation among its rated universe and the sectors at large, and transparently communicating to the market its views, forecasts and its assumptions and the rating sensitivities through sector-specific webinars and research reports.
The compendium is freely available for download from our website www.indiaratings.co.in.
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