CRISIL: 188 Companies defaulted in FY12

Crisil: 188 companies defaulted in FY12
TUESDAY, 03 APRIL 2012 16:35

Crisil Ratings has downgraded a total of 188 entities and one third of them have been placed under the default category.

According to CRISIL, this is the highest in a single year in absolute terms, and on a relative basis, translates into a 10-year high annual default rate of 3.4%.
 
“These pressures are also reflected in the increase in banks’ gross non-performing assets (NPAs; to 2.9 per cent of advances from 2.3 per cent), and in the quantum of debt restructured (to 3.3 per cent of advances from 2.5 per cent) between March 31 and December 31 of 2011,” the CRISIL release said.
 
“Weak liquidity caused by elongation of working capital cycles is the primary reason for the defaults. This trend is likely to persist with slowing demand,” Roopa Kudva, Managing Director and Chief Executive Officer, CRISIL, said in the release.
 
Sectors that will continue to be under stress are- textile, steel and construction engineering, power, commercial real estate and the new telecom players. But the ratings agency says, the operating profitability for the services sector and established telecom players will improve in the current financial year.
 
“The credit quality of India’s corporates will remain under pressure, given the slowdown in demand. However, high operating rates, softening in commodity prices and flexibility to defer capital expenditure will help players offset profitability pressures, and tackle slackening in demand,” said Ramraj Pai, President, CRISIL Ratings.