Crisil Says Half Of Its Mid-Size Rated Cos Are Eligible For Loan Overhaul Under New Guidelines, Retail News, AND Retail
A day after the RBI authorized another round of restructuring, the largest national rating agency Crisil said Thursday that half of the mid-size companies in its portfolio would be eligible for the overhaul. Firms with relatively lower credit profiles and part of low resilience sectors are expected to benefit more from the program, Crisil said, adding that mid-sized firms are those with aggregate exposures below Rs 500 crore.
RBI Governor Shaktikanta Das on Wednesday announced another window to recast loans given the second wave of COVID-19 infections.
As per the announcement, individuals, small businesses and MSMEs with total exposure of up to Rs 25 crore would be eligible for consideration under the Resolution 2.0 framework, provided they have not taken advantage restructuring in one of the previous frameworks and have been classified as standard accounts. as on March 31.
Crisil said he valued 6,800 mid-sized entities and more than half of them were small and medium-sized enterprises (SMEs) with exposure to bank loans of up to Rs 25 crore.
Over 3,400 medium-sized businesses have been classified as standard accounts, making them eligible for restructuring.
“The RBI’s intervention is timely and companies with weaker credit profiles will benefit more from the restructuring plan,” said its director of ratings Subodh Rai.
Four out of five companies eligible for restructuring have investment sub-category ratings, indicating their relatively weak ability to handle liquidity shocks, he said, adding that the new overhaul program will provide interim relief of liquidity to these companies to deal with short-term cash flow. flow mismatches.
In FY21, a third of SMEs had amortized their liquidity by taking advantage of the RBI moratorium on bank lending. This relief was complemented by a rebound in demand, which limited the number of companies that had opted for restructuring under Framework Resolution 1.0, he said.
The agency said it analyzed the impact of the proposed restructuring on a sectoral basis, classifying 43 sectors (excluding the financial sector) into three categories – high, moderate and low resilience.
Businesses in low resilience sectors such as retail, hospitality, auto dealerships, travel and tourism, and residential real estate are likely to be most affected by the resurgence of the pandemic, and therefore more likely to opt for restructuring, its director Rahul Dit Guha.
On the other hand, companies in high resilience sectors such as chemicals, pharmaceuticals, dairy, information technology and consumer staples / FMCG might not face pressures from the market. significant liquidity due to constant consumer demand and will be the least likely to restructure, he added.
The agency further stated that it would assess the impact of Restructuring 2.0 on its rated credits on a case-by-case basis after taking into account the speed and terms of the debt restructuring, as sanctioned by the respective lenders and regulatory guidelines.
If the impact of the second wave of the pandemic is not contained over the next 2-3 months, further restructuring may be needed, he warned.
