CRISIL says its rating upgrades exceed downgrades in past six months

The ratings agency believes that the worst is over for the Indian economy, and present trends indicate that upgrades will outnumber downgrades in 2010-11

Ratings agency CRISIL has said that in a reversal of a three-year trend, it has upgraded more companies than it downgraded in the second half of 2009-10 as against 108 rating upgrades, there were 95 downgrades. The number of defaults too declined during the second half of the year to 20 from 29 in the first half, it said in a release.

Roopa Kudva, managing director and chief executive officer, CRISIL, said, “We believe that the worst is over for the Indian economy, and present trends indicate that upgrades will outnumber downgrades in 2010-11. However, the degree to which the credit cycle turns will depend on the sustainability of demand growth, and the impact of fresh capital expenditure on players’ balance sheets.”

This reversal resulted in CRISIL’s modified credit ratio (MCR; the ratio of upgrades plus reaffirmations to downgrades plus reaffirmations) increasing 0.93 times for the entire 2009-10 period from 0.86 times for 2009-09, snapping a four-year trend of decline that had begun in 2005-06, it said.

With this, the credit cycle seems to have turned after the recent global economic slowdown. These trends were observed on a portfolio of almost 4,000 CRISIL-rated entities; of these, 75% are mid-sized entities, each having an annual turnover of less than Rs5 billion, the ratings agency added.

CRISIL, a Standard & Poor's unit, said that companies in the real estate and real-estate-dependent industries account for 18% of the ‘negative’ outlooks, while those in the textile business account for 12%. Both these industries are still highly leveraged, and will require strong demand revival or large equity infusions for their credit profiles to stabilise. Textile players will also need to contend with exchange rate volatility, it added.

Construction players, on the other hand, are witnessing robust demand, arising from the government’s increased focus on infrastructure spending, account for almost 20% of the ‘positive’ outlooks, CRISIL said.

The ratings agency said that it believes that the outlook for credit quality in 2010-11 is positive. While present trends indicate that upgrades are likely to outnumber downgrades in 2010-11, a global credit event on sovereign debt, a build-up of inflationary expectations, and exchange rate volatility may yet disrupt the trends over the near to medium term.

“The credit fallout of these events can be significant because governments have limited room to address them through further fiscal and monetary measures,” cautioned Ajay Dwivedi, director, CRISIL Ratings.

CRISIL said that infrastructure and infrastructure-related industries (including power equipment, steel, cement, healthcare, and education) and the financial services sector are likely to witness high demand growth over the medium term. Export-dependent industries, such as gems and jewellery, textiles, and information technology (IT) and IT-related services, are likely to grow moderately on the back of revival in the global economy. Commercial real estate and leisure industries are likely to face severe demand-supply imbalances. 

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Emami finalises Rs20-crore marketing budget for Zandu Balm

The brand will now focus on Indian youth and rural markets

Emami Ltd has earmarked Rs20crore as the marketing budget for its healthcare product, Zandu Balm, for the current fiscal. It recently signed up cricketers Virender Sehwag, Amit Mishra and Dinesh Karthik as brand ambassadors for the Zandu Balm brand.

The company is also planning to come up with a new ad film for the balm by June 2010 which will involve all the brand ambassadors. The film will be directed by Prahlad Kakkar and the script will be written by Adi Pocha.

“The size of the pain-relieving market in India is estimated to be about Rs1,500 crore and Zandu Balm holds the pole position in this category. We intend to popularize the Zandu Balm brand among Indian youth. Our objective is to make the brand more acceptable to the young generation in India,” said Mohan Goenka, director, Emami Group.

Zandu Balm is currently a Rs200-crore brand and is expected to maintain an annual growth rate of 15%. The company is planning to launch low-unit packs to penetrate rural markets.

Founded in 1974, Emami is a Rs3,000-crore diversified business group. It has activities in FMCG, newsprint, hospitals, edible oil and realty sectors.

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Property prices drop in some pockets of Mumbai

A few developers who were increasing prices so far, are trying to clear inventories by dropping or freezing tariffs

Many media companies and financial institutions have been coming up with reports which indicate that property prices have reached the levels touched in 2007, and will increase further.

But the real picture seems to be different.

A few developers were hiking prices in Mumbai over the past three months, but inventories have been piling up. Ergo, developers who are sitting on these inventories are either lowering or freezing their prices.

The Nahar Group is a case in point—it has reduced prices in its project ‘Nahar’s Amrit Shakti’, situated at Powai in central Mumbai. A two-bedroom hall & kitchen (BHK) of 1,150 sq ft is retailing at Rs7,800 per sq ft—the price was Rs8,500 per sq ft one-and-a-half months back.

K Raheja Corp is launching two new towers at ‘Raheja Vistas’ (also at Powai), at Rs7,900 per square feet. The developer has no plans to increase prices. 

Developers who are planning to come up with new projects are also not increasing prices, but are trying to keep them at reasonable levels. According to Ressex data (released by real-estate advisory firm Liases Foras), the number of units sold in Mumbai went down by 25% in December 2009 compared to September 2009.

Currently, inventories in the Mumbai Metropolitan Region (MMR) stand at 82 million sq ft and Ressex data indicates that demand for high-value properties continues to be depressed.

Developers who have to offload 500 units to 1,000 units over the next two years are also keeping a lid on prices.

For many media companies, headlines that point to property prices rising even further, usually translates into increased advertising revenue. In some cases, they have equity deals with realty companies which include an agreement to project reports that favour these companies. A reader has written to point out that some of these headlines sound like “quotes from the builder.” 

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COMMENTS

vivek

7 years ago

Will new RBI real estate index will curb Black Money in real estate.. ?

deepak

7 years ago

Good article. Independent (of vested interests) reporting is where moneylife differentiates itself from other business publications
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For many media companies, headlines that point to property prices rising even further, usually translates into increased advertising revenue. In some cases, they have equity deals with realty companies which include an agreement to project reports that favour these companies"
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