Lower-than-expected loan restructuring in MEC space: Ind-Ra

Mumbai, Feb 3 : Lower-than-expected loan restructuring has been witnessed for mid and emerging corporates, said India Ratings and Research.

According to an estimate by the ratings agency, only 5 per cent of its rated 450 issuers in the mid and emerging corporates (MEC) space had availed the Reserve Bank of India’s financial restructuring facility available till December 31, 2020.

“The lower-than-expected restructuring was on account of the various government measures and faster demand recovery in the domestic market, supported by a marginal pick-up in exports in certain sectors,” the ratings agency said.

“Issuers having availed restructuring are primarily rated in the ‘IND BB’ and below rating categories with stretched liquidity. Such issuers belong to the ‘Industrial and Discretionary’ segments and operate mainly in sectors such as real estate and construction and engineering.”

Besides, Ind-Ra said lower restructuring stems from the Rs 3 trillion Emergency Credit Line Guarantee Scheme and the Covid-19 loans provided by banks, offering respite to issuers with weak liquidity and increasing their ability to withstand the sustained cash flow pressures caused by the pandemic-caused lockdown.

“Even though not all issuers had availed the additional funding, the same has flowed down to the entities lower down the value chain. Many banks have also automatically converted the interest due on the working capital loans under moratorium into term loans, thus, eliminating the need for the issuers to apply for the restructuring scheme.”

“Moreover, the revised definition of micro, small and medium enterprises (MSMEs) has enhanced the access of freshly included entities to funding from the financial system.”

Disclaimer: This story is auto-generated from IANS service.