HomeBUSINESS100 Indian firms face risk of downgrade after new rating rules: Moody's,...

100 Indian firms face risk of downgrade after new rating rules: Moody’s, ICRA


The Indian unit of credit rating agency Moody’s, ICRA, said on Wednesday that nearly 100 companies with debt totalling 350 billion rupees ($4.40 billion) are likely to be downgraded after the central bank tightened rating methodologies.

The companies likely to be affected are mostly in the power, healthcare, engineering, construction and roads sectors.

“Our assessment suggests that if the credit profile of these entities does not undergo any change … there could be an average impact of around two notches to the existing ratings,” said Jitin Makkar, senior VP, ICRA.

As a result, Indian banks could have to set aside an additional 4 billion rupees given the higher capital requirement for lower-rated companies, ICRA said.

The Reserve Bank of India issued new guidelines in April, noting that there was a wide variation in the evaluation mechanism and methodologies adopted by different credit rating agencies.

Under the changes, the rating agencies can only take into consideration an explicit guarantee by a third party for a company’s debt, while other widely accepted forms of support such as letters of support or pledged shares will no longer be considered.

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

Catch all the Corporate news and Updates on Live Mint.
Download The Mint News App to get Daily Market Updates & Live Business News.


Subscribe to Mint Newsletters

* Enter a valid email

* Thank you for subscribing to our newsletter.


Source link


Most Popular

Recent Comments