Credit profiles of mid-sized cos hit as revenues fall

Mumbai: The best phase of credit profiles for mid-sized corporations may be coming to an end as revenue growth slows and bargaining power reduces, said India Ratings and Research (Ind-Ra).

Bigger companies with revenues of thousands of crores would be better placed because of their better profitability. “The divergence witnessed in the first half of FY24, if sustained, could be the first sign that commodity price volatility, slowdown in export demand and tight liquidity have started to impact mid- and small corporates, although the buffers available may continue to provide cushion to the credit profiles,” says Soumyajit Niyogi, director, corporate ratings, Ind-Ra.

Indian companies have been witnessing an improvement in credit profiles as low interest rates since 2020 lowered cost of funds and improved profitability. But that has changed since. In the past year, interest rates have soared and inflation has eaten into profit margins.

Large corporations have seen a similar slowdown on credit profiles and low revenue growth, but their higher operating margins and stable working capital cycle are providing a buffer.