said rated entities have sought a three-month moratorium on payments from lending institutions. These corporates have either received approval after the original due date, or are yet to receive the same. The Securities and Exchange Board of India (Sebi), through a circular dated March 30, 2020, had asked them to make such disclosures.
On March 27, the RBI permitted banks and finance companies
to allow a three-month moratorium, on payment of instalments of term loans outstanding as of March 1, 2020.
Lenders could also grant a deferment of three months on payment of interest working capital facilities outstanding as on March 1. The accumulated interest for the period is to be paid after the expiry of the deferment period.
The rating agency said the missed payment by entities, even in the case of those awaiting formal approval from lenders prior to the original due date, is not considered a default.
will review its stance on default recognition if entities do not receive an approval for the moratorium from lenders in due course.
Bankers said the three-month moratorium is an interim step. The effects of lockdown will be felt over many quarters, and it will be a while before things normalise.
Much more support, including a one-time restructuring, would be needed for firms hit by demand destruction. Asset quality pressures are expected to persist, leading to further downgrades.
In its rating review, ICRA
said the credit quality of a large swathe of entities — across a wide range of sectors — would worsen as a consequence of the Covid-19 crisis. The acuteness of the impact remains uncertain, and would depend on how quickly the pandemic is contained.
It anticipates significant deterioration in credit quality in the near term. The extent of the same would depend on factors like duration of the lockdown, pace at which normal business activity resumes, and quantum of government and regulatory support.
Sectors in which the rating downgrade pressure is likely to be higher are aviation, hotels, cut and polished diamonds, retail, textiles (cotton spinning), and real estate (retail).
At the same time, sectors that might be less exposed to cash flow disruption are telecom, health care, roads (annuity), agri products, FMCG, and education.
In addition, rating action may be more tempered for higher-rated entities that have multiple levers, such as strong on-balance sheet liquidity, strong refinancing ability, or backing of a strong parent or group, added ICRA.