Ind-Ra: corporate rating upgrades continue to outpace the downgrades in July 2023

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Credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has stated that the corporate rating upgrades continue to outpace the downgrades in July 2023, as it upgraded 20 ratings in July 2023 (June 2023: 29) while downgrading 10 ratings (June 2023: 9). As per the report, the upgrades were mainly in the realty, power and auto & auto components sectors in the reported month. During May to July 2023, issuers belonging to power, auto & auto components, consumer services and capital goods sectors saw the highest proportion of positive rating actions.

Ind-Ra further noted that issuers belonging to realty benefitted from better-than-expected pre-sales or healthy occupancy levels, leading to improved liquidity and thereby healthier financial metrics, while renewable power issuers were upgraded, on the back of a better-than-expected operating performance, an increase in average tariff realisation and improved liquidity. Further, auto & auto components issuers benefitted from a large order book amid a recovery in the domestic auto industry as well as improved financial metrics.

The report said the rating downgrades in textiles (including one to default) were individual issuer-specific and mainly driven by inability to pass on increase in raw material prices or deterioration in financial metrics due to an inventory pile-up, leading to tightening of liquidity. Financial institutions saw upgrades for two issuers during this period, on account of growing franchise and strong credit growth and improved capital buffers while maintaining adequate liquidity and a stable asset quality.