At 16 downgrades a day between January and now, corporate India's finances have never been more stretched. And with the coronavirus pandemic threatening to disrupt businesses well beyond the 21-day lockdown, many more companies could default. From the state-owned ONGC to mortgage player Indiabulls Housing Finance, financials of businesses everywhere appear to be deteriorating; from 464 in January to 579 in March, downgrades are rising rapidly.
On Thursday, Moody's said it had placed "on review for downgrade" Tata Motors Limited’s (TML) Ba3 corporate family rating and Ba3 senior unsecured debt rating. It added, the outlook has been revised to ratings under review from negative.
CRISIL has downgraded Air India's non-convertible debenture (NCD) facility amounting to Rs 700 crore to BB+ from AAA while retaining a ‘Rating Watch with negative implications’. Moody's has downgraded Delhi Airport’s ratings to Ba3 and placed Hyderabad Airport’s rating on review for possible downgrade, reflecting the increasingly stringent travel restrictions imposed both in India and globally.
On March 24, Moody’s downgraded ONGC's local and foreign currency issuer ratings to Baa2 from Baa1 saying the credit profile was insufficient for the rating to remain above India’s Baa2 sovereign rating. Moody's believes ONGC’s credit metrics will weaken beyond the tolerance level for its ratings, if oil prices remain low for a prolonged period.
While more than 1,450 firms have been downgraded between January and March, only 385 have been upgraded. Among others, the worst hit sectors are textiles, real estate, hotels, automobile and auto parts. Of the 120 corporates reviewed by CRISIL from the most impacted sectors — aviation, hospitality, malls, hotels, retail and multiplexes — action has been taken in the case of 81, while ratings have been retained for 39 firms.
"The actions are largely driven by near-term challenges to liquidity, which could impact financial flexibility," CRISIL said. While some companies will see a pressure on cash flows due to the lockdown, others may be faced with longer-term impact. Rating agencies are monitoring the developments, including the steps taken by public sector banks to help companies tide over liquidity challenges. However, companies that have taken a large revenue-hit will continue to be under watch. The worst hit by the ongoing crisis are businesses in the travel, tourism, hospitality and aviation spaces.