High input costs and interest rates will continue to exert credit quality pressure on Indian corporates, domestic credit rating agency Crisil said in a report on Monday.
For exporters, there will be lower realisations because of rupee appreciation, the report added. Crisil's modified credit ratio for FY 2008 was at 0.97 times, that is, downgrades outnumbered the upgrades during the year.
"This is the first time in four years that modified credit ratio has remained below one time for an entire financial year. It marks a reversal after four years of steadily improving credit quality for Indian corporates," Crisil Ratings Director N Muthuraman said.
However, credit quality pressures does not automatically mean more defaults.
The reversal comes at a time when companies' financial risk profiles are strong after four years of good performance and capital strengthening, the report said.
"We, therefore do not expect any significant increase in defaults among rated companies in the medium term, despite some expected weakening in credit quality," Muthuraman said.
Crisil also expects moderation in GDP growth, including the industrial production growth rate, since these variables have exhibited strong correlation with modified credit ratio in the past.
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