Volatility in commodity prices in FY23 impacts profitability of MSMEs: CRISIL

New Delhi, Apr 4 (KNN) The volatile commodity prices in the previous financial year that ended March 31 has impacted India’s micro, small and medium enterprises (MSMEs), said CRISIL.

It has also lead to credit rating downgrades, the rating agency said on Monday.

Largely comprising of MSMEs around 60 per cent of the downgrades by CRISIL were in the sub-investment grade category in the second half of FY23.

Nearly 70 per cent of the downgrades were led by a decline in profitability and/or liquidity pressure faced by these companies.

“The downgrade rates have started reverting to their long-term averages. Volatile commodity prices have impacted profitability, particularly of micro, small and medium enterprises (MSMEs), while export-oriented sectors face headwinds from a slowdown in their major markets,” said Gurpreet Chhatwal, Managing Director, CRISIL Ratings.

When the restructuring scheme was announced, around 6 per cent of the loans to the MSME sector were restructured, as against an overall restructuring of around sub-2 per cent.

“At that time when the pandemic was at its peak, we were expecting a higher degree of impact on the MSME sector, with maybe close to half of their loans expecting to slip into NPAs,” Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer told ET Online.  (KNN Bureau)