India’s Moody’s credit rating agency, ICRA, said on Wednesday that nearly 100 companies with total debt of 350 billion rupees ($4.40 billion) are likely to be downgraded after the central bank tightens. strict ranking methods.
The companies likely to be affected are mostly in the electricity, healthcare, engineering, construction and road sectors.
“Our assessment shows that if the credit profiles of these entities do not show any changes … there could be an average impact of about two orders of magnitude on existing ratings,” said Jitin Makkar. , said senior vice president of Icra.
As a result, Indian banks may have to set aside an additional Rs 4 billion due to higher capital requirements for undervalued companies, ICRA said.
The Reserve Bank of India issued new guidance in April, noting that there is wide variation in the rating mechanism and methodology adopted by different credit rating agencies.
Under these changes, rating agencies can only consider explicit third-party guarantees on a company’s debt, while other widely accepted forms of support such as letters of support or pledged shares will no longer be considered.
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