Roopa Kudva, MD and CEO at Crisil has expressed his opinion about the functioning of the Crisil and has given an in-depth analysis of the number of the companies in their database. His verbatim speech is as appended below:
The significance of the rating-action ratio is higher than it has ever been before in the last 20-25 years. That is because this ratio is computed on a base of about 8100 companies. So it’s very rich data and provides a lot of insights. Having said that, way back in April 2011, CRISIL had said that the credit quality of Corporate India had peaked, which means the rating-action ratio - the ratio of upgrades to downgrades- which was at 1.1 was expected to significantly go down from that level. That is indeed what has happened. In the first half of the year, the pace of upgrades has come down whereas the pace of downgrades has gone up. So we have upgraded about 300 companies and downgraded about 200 companies in the six months till September. After September however what has started happening is that the downgrades are now exceeding the upgrades. The pressures initially began because of pressures on profitability, because of rising input costs, interest rates, etc. The next pressure point that we had identified was the demand slowdown. Indeed, what we are seeing now is that the demand slowdown is affecting several sectors across the board which is further creating a pressure on credit quality.
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