Cost pressure may spike default rates among lower-rated firms: Crisil

Sub-investment grade MSMEs are at high risk; sunset for pandemic-induced relief measures to have a bearing too

Rising cost pressure brought on by volatile input prices, and withdrawal of pandemic-induced relief measures may further increase default rates especially among sub-investment-grade firms, or those with a rating of “BB” and below, according to CRISIL Ratings.

This category is dominated by MSMEs-- those with turnover less than or equal to Rs 250 crore.  

The annual default rate rose to 5.24 per cent in FY22 from 3.9 per cent in FY21, but lower than the 6.1 per cent average between fiscals 2011 and 2020. About 90 per cent of the entities that defaulted last fiscal were MSMEs.

The default rate