Executive summary

In line with our expectations, the CRISIL Ratings credit ratio (rating upgrades to downgrades) moderated in the second half of fiscal 2024 but remained elevated at 1.79 times compared with 1.91 times in the first half. In all, there were 409 upgrades and 228 downgrades.

For fiscal 2025, the credit quality outlook remains positive with upgrades seen continuing to outpace downgrades, driven by domestic demand, low corporate debt levels and tailwinds from the ongoing infrastructure build-out.

The upgrade rate dipped a marginal ~70 basis points to 12.0% compared with the first half. Sectors gaining from strong domestic consumption and government spending dominated the upgrades. The infrastructure and linked sectors outperformed the CRISIL Ratings portfolio with construction, renewable power and road assets leading the upgrades.

The downgrade rate, at 6.7%, remains closer to the 10-year average. As expected, some export-linked sectors, such as textile and seafood saw a higher downgrade rate due to subdued global demand or high-cost inventory that impacted profitability.

That said, the reaffirmation rate remained steady at ~81%.

The three key pillars of India Inc’s credit quality — deleveraged balance sheets, sustained domestic demand and government-led capex — kept the upgrade rate elevated in the second half of fiscal 2024. That’s above the 10-year average for the sixth consecutive half-year. While commodity prices have softened, revenue of upgraded companies grew ~13% in fiscal 2024 largely led by a pick-up in volume. With balance sheets in most sectors at their healthiest, capacity utilisation around peak levels and expected interest rate cuts, a broad-based pick-up in private capex is finally in sight.

The proprietary CRISIL Ratings’ credit quality framework for the corporate and infrastructure sectors — the COIN framework — provides our credit quality outlook for fiscal 2025 on 38 sectors accounting for ~72% of the rated debt.