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Two entities upgraded for every downgrade in FY24, hospitality sector records 23 upgrades: ICRA

Two entities upgraded for every downgrade in FY24, hospitality sector records 23 upgrades: ICRA
  • The hospitality sector saw 23 credit rating upgrades, with no downgrades at all in FY24, says ICRA.
  • Auto, financial sector, power, realty and transport infrastructure also saw several upgrades.
  • Agriculture, chemicals, construction and apparel sectors saw the most downgrades.
The fiscal year of FY24 continued the ‘upgrade momentum’ that was set into motion in FY22, said the credit rating agency ICRA. Two entities had been upgraded for every entity downgraded during the year, the rating agency said in a report released on Monday.

The biggest winner for the year is the hospitality sector — with 23 upgrades and an upgrade rate of 37%. And, there were no downgrades at all. ICRA maintains a positive outlook on the Hospitality sector for FY2025 as well.

The other sectors which saw the most number of upgrades include auto and auto components, finance, power, realty and transport infrastructure. On the other hand, sectors which saw the most number of downgrades are — agricultural food and other products, chemicals and petrochemicals, construction, textiles and apparel.

Company-specific factors

While entities in aviation, hospitality, auto & auto components, and banks gained from the industry tailwinds in FY24 – that’s not the only factor behind most upgrades.

“A large majority of rating upgrades were driven by company-specific factors such as expansion in market share or order book, improvement in the cost structure, reduction in project risk, or fresh equity infusion that strengthened the balance sheet,” says K Ravichandran, chief rating officer at ICRA said.

Overall, credit profiles continued to improve last year. The number of instances of defaults dipped to five in FY24, compared with 22 in FY23 and 42 in FY22.

“Corporate India has shown a high resilience to withstanding the rise in borrowing costs over the past two years and is seen to have the capacity to bear the current level of interest rates before the rate cut cycle likely begins in the latter part of the year,” said Ravichandran.

Banks & NBFC asset profiles at decadal best

The financial sector has also been one of the best-performing sectors for the year in terms of credit profile. It saw an upgrade rate of 13%, next only to auto. Its downgrade ratio is also low at 2%.

“The asset quality of banks and NBFCs has also been at its decadal best with the profitability and the capitalisation indicators expected to remain healthy in the near term. The series of proactive actions taken by the regulators (RBI and SEBI) in recent years would work to further strengthen the financial system and the capital markets,” opines Ravichandran.

He, however, added that the key downside factors that could derail progress in multiple sectors are the monsoons and complicated geopolitical landscape.

Two wars, the Red Sea crisis and sluggish exports had been weighing on India in FY24. “Yet, these did not feel heavier as domestic consumption demand across several sectors, government spending on public infrastructure, and healthy balance sheets lent support to the credit profiles of entities,” says ICRA.

In FY25, the rating agency expects India’s GDP to expand by 6.5%, with the average retail inflation estimated to be moderate at 4.6%.


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