New Delhi, Jan 27 (IANS): Negative rating actions by ICRA increased during March-December 2020 to about 13 per cent of the ratings agency's portfolio, against the previous five year average of 9 per cent.

An ICRA statement said that the credit quality of India Inc has experienced rapid changes since the onset of the Covid-19 pandemic and the imposition of the nationwide lockdown in March 2020.

It said that business health has been bruised in general and some entities in select sectors have been badly hurt, even though the effects have not been apocalyptic, and the worst-case scenarios have not played out.

"Negative rating actions by ICRA increased between March-December 2020 and about 13 per cent of the portfolio experienced a rating downgrade as against the previous 5-year average of 9 per cent," said K. Ravichandran, Deputy Chief Rating Officer, ICRA.

"In addition, another 9 per cent of the rated entities witnessed a change in outlook, from stable to negative or from positive to stable."

Ravichandran noted that among the sectors, textiles, real estate and construction were the top three in terms of the count of downgrades.

Besides, aviation and hospitality sectors too witnessed a number of negative rating actions.

"As for upgrades, only 3 per cent of the rated entities were upgraded in the past 10-month period, as compared with the previous five-year average of 9 per cent. These upgrades were driven entirely by entity-specific factors and were far from being a harbinger of any sector-related tailwinds," Ravichandran added.

ICRA noted that instances of defaults have been much lower in the past 10 months, supported in good measure by the moratorium on loan payments available to the borrowers between March and August 2020 and other liquidity support lines or loan restructuring reliefs availed.

There were only 30 defaults across the rating spectrum compared with 81 in the corresponding previous period.

"It seems incongruent that in arguably the most stressful period for businesses in recent history, the instances of defaults remained low. But this was largely an outcome of the relaxation provided by the regulators to the credit rating agencies (CRAs) in terms of default recognition," the statement said.