India Ratings and Research (Ind-Ra) has reported a strong performance in the corporate credit profile during the initial half of the current fiscal year. The agency noted that a total of 202 issuers received rating upgrades, reflecting a positive trend in the creditworthiness of corporations across various sectors. This development is particularly significant as it indicates a robust corporate credit landscape, driven by various underlying economic factors.

Strong Upgrades and Low D/U Ratio

According to Arvind Rao, Head of Credit Policy Group at Ind-Ra, major corporations and those rated 'A' experienced a notable increase in upgrades, resulting in a low downgrade-to-upgrade (D/U) ratio of 0.31. This ratio signifies that for every downgrade, there are approximately three upgrades, showcasing a healthy credit environment.

Ind-Ra highlighted that this trend has been consistent over the last four years. In total, 202 issuers, representing 20% of the reviewed portfolio, saw their ratings upgraded, while 62 issues faced downgrades. Mr. Rao anticipates a slight moderation in the D/U ratio for the current fiscal year compared to 0.37 recorded in the previous fiscal year, 2023-24.

Outlook for the Second Half

Looking ahead, Mr. Rao expressed confidence that the second half of the fiscal year would likely witness more issuer rating upgrades, surpassing the number of downgrades. The positive momentum observed in the first half was particularly marked by a significant increase in rating upgrades for large corporations, especially those in the 'A' category and above, which experienced fewer downgrades compared to previous periods.

Economic Factors Supporting Growth

The favorable trend in corporate credit ratings is underpinned by several key factors, including robust economic growth, strong domestic consumption demand, and a rise in rural demand. Additionally, sustained government emphasis on capital expenditure has played a critical role in enhancing the overall economic environment. A thriving services sector has also contributed to the positive outlook for corporate credit profiles, as highlighted by Ind-Ra, which is part of the Fitch Group.

The consistent performance in corporate credit ratings indicates that Indian businesses are increasingly navigating challenges effectively and capitalizing on opportunities in the market. As the fiscal year progresses, the continued focus on economic development and consumer demand is likely to further strengthen the credit profiles of corporations across the country.

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