Half of Crisil-rated mid-sized companies will be eligible for the restructuring window offered under the Resolution Framework 2.0 announced by the Reserve Bank of India (RBI), the rating agency said on Thursday.
Companies with relatively weaker credit profiles, and part of low-resilience sectors, are expected to benefit more from the scheme, it added.
The RBI had on Wednesday announced a slew of measures to mitigate the impact of the pandemic on businesses and individuals, including a restructuring window for small businesses.
Disruptions caused by the second wave of the pandemic may hit smaller businesses and the restructuring would entail rescheduling of their financial obligations, thereby easing liquidity pressure.
“Crisil rates about 6,800 mid-sized companies (excluding financial sector entities). Of these, 3,500 are small and medium enterprises (SMEs), having bank loan exposure of up to ₹25 crore. About 3,400 of them are standard accounts, which makes them eligible to avail of the restructuring,” Crisil Ratings said.
Subodh Rai, Chief Ratings Officer, said, “The RBI’s intervention is timely and companies with weaker credit profiles will benefit more from the restructuring scheme. Four out of five companies eligible for restructuring have sub-investment category ratings, indicating their relatively weak ability to manage liquidity shocks.”
“Restructuring 2.0 could provide interim liquidity relief to these companies to cope with near-term cash-flow mismatches,” he said.
Last fiscal, a third of the aforesaid SMEs had cushioned their liquidity by availing of the RBI moratorium on bank loans. This relief was complemented by a bounce back in demand, which limited the number of companies that had opted for restructuring under the Resolution Framework 1.0, the rating agency said.