Ratings downgrades soar in India
By Joe Leahy in Mumbai
Published: April 1 2009 23:43 | Last updated: April 1 2009 23:43
Crisil, the Indian arm of Standard & Poor’s, said credit ratings downgrades in the past year rose sixfold against a year earlier, suggesting corporate India is suffering increasing pain from the global economic crisis.
The news came as mid-sized pharmaceutical company Wockhardt, a significant borrower on foreign markets, formally applied to its creditors for debt restructuring, bringing to 35 the number of such cases in the past 12 months, compared with 10 a year earlier.
Crisil said credit defaults rose to 13 in the fiscal year ending March 31, against zero over the past three years.
“As on March 31 2009, 13.8 per cent of Crisil’s long-term ratings had negative outlooks, the highest since Crisil introduced rating outlooks in 2003,” the agency said. “This indicates that continued economic deceleration can cause more downgrades over the next 12 to 18 months.”
India has been buffered from the worst of the economic crisis because of its relatively sound banking system, which is dominated by state-owned institutions that did not binge on complicated derivatives.
But the country’s industrial sector, which had earlier thought itself to also be immune, is reeling from a sharp contraction in demand and credit availability, with the automotive, cement, real estate, textile and airline industries hit particularly hard. Other companies that have suffered are those that borrowed in the form of foreign currency convertible bonds, like Wockhardt.
The Mumbai-based pharmaceutical group has $140m of convertible bonds due in a single bullet payment this September and total debt of Rs34bn ($673m) as at the end of December 2008, dwarfing its market capitalisation yesterday of just Rs8.3bn.
The company’s share price on Wednesday ended down 11.1 per cent, or Rs76 per share, its biggest fall since October.
Wockhardt said it was approaching the Corporate Debt Restructuring Cell, a voluntary body for corporates to restructure loans, the 35th Indian company to do so in the past 12 months.
Crisil said of the 84 entities whose ratings were downgraded in 2008-09, 15 were from the automotive sector, 14 from the financial sector, eight from the textile industry and seven each from metals and mining, construction and real estate.
“Crisil expects severe credit quality pressure to continue in the textile and real estate industries; suppliers to the real estate industry are vulnerable to delayed payments and even write-offs,” the agency said. |
