“The ratio spiralled to ‘3.05x’ in FY21, on account of the liquidity pressure. However, the ratio improved to ‘0.68x’ in FY22, in line with the agency’s recovery expectations.”
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Fiscal support is seen to stabilise India’s mid-corporates’ FY23 outlook after the sector was heavily battered by the pandemic.
The ‘Mid & Emerging Corporate’ (MEC) sector analysed by India Ratings includes 10 segments such as steel and textiles.
These segments have witnessed a ‘V-shaped’ recovery in FY22 while hospitality and auto ancillary, the other sectors have remained weak.
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“In line with the agency’s expectations, operating margins have improved in FY22 across some key sectors; however, it has come at the cost of a working capital build-up,” the ratings agency said.
Besides, Ind-Ra has maintained a ‘Stable rating Outlook’ for its MEC-rated portfolio for FY23, on account of the fair amount of liquidity support and also the major initiatives been taken by the Centre in rendering support in the form of GECL and one-time loan recasting.
Furthermore, the agency pointed out that Guaranteed Emergency Credit Line (GECL) has helped these sectors to meet the liquidity gap.
“A total of Rs 2.18 trillion under GECL still available with them to meet liquidity needs.”
The agency expects that these will lead to lower negative rating actions in FY23.
“During the three-year pre-Covid-19 period (FY18-FY20), the downgrade to upgrade ratio for all Ind-Ra-rated MEC players combined was at a0.97x’.”
“The ratio spiralled to ‘3.05x’ in FY21, on account of the liquidity pressure. However, the ratio improved to ‘0.68x’ in FY22, in line with the agency’s recovery expectations.”
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