India with the Lowest AAA cos Rating Amongst Emerging Markets: Crisil Ratings

Highlights

  1. There is only 0.85% of AAA rated companies in India out of globally rated companies.
  2. India out of globally rated companies, which is far behind the ratings projected by countries like China, Taiwan, Thailand, and South Korea.
  3. If 32,500 AAA rated Indian companies were to be assessed on the global scale, their ratings will be boxed on a far narrow bound between BBB category and D on the global scale – Crisil

The amount of AAA rated companies in India is amongst the lowest as compared to the other companies in the emerging markets. Crisil believes even the companies which are rated AAA in India cannot be compared with other AAA-rated companies around the world.

It is astonishing to believe that there is only 0.85% of AAA rated companies in India out of globally rated companies, which is far behind the statistics projected by the countries like China, Taiwan, Thailand, and South Korea after analyzing the national rating data from these countries.

Korea Ratings (Credit rating agency) from South Korea rates 68% of the companies in the country, which has rated 17% of the companies portfolio as AAA. Another credit rating agency Korea Investor Services has rated 13% of its rating portfolio at AAA, while China also has 13% of all the credit ratings at AAA. Taiwan stands at 9% and Thailand at 5%.

Crisil said domestic companies which are rated AAA cannot be compared with the global ratings at the same level “A national rating scale affords granular benchmarking of domestic issuers on a 20-point scale (AAA to D) and the sovereign, which has the flexibility to print local currency, is pegged at AAA on this scale,” Crisil.

“If around 32,500 AAA rated Indian companies were to be assessed on the global scale, their ratings will be boxed on a far narrow bound between BBB category and D on the global scale because India’s sovereign rating (in the BBB category) will usually serve as a ceiling,” Crisil said.

Globally too there has been a gradual decline in the amount of AAA rated companies. At S&P Global Ratings, it has gone down from 89 a decade ago to 9 as of January 1, 2018.

In 2017, AAA-rated companies in the U.S accounted for less than 5% of bond issuances. A and BBB firms accounted for over 60% and speculative grade near 20%.

“Over the past decade or more, companies in the developed economies have relied more on debt in their quest to increase shareholder value. When reliance on debt increases, financial risk also rises leading to a lowering of credit ratings. The width and depth of the corporate bond markets in these geographies and ultra-low borrowing costs over the past decade have also encouraged the shift to debt-driven growth,” said by Gurpreet Chhatwal, President, Crisil Ratings.

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