“A rapid peak could limit the impact of the 3rd wave on the economy”

Rating services pioneer Crisil, which has grown into a global analytics company, now derives only 15% of its business from credit ratings. Its new Managing Director and CEO Amish Mehta in an interview told TOI how the agency retained growth figures despite the new Covid variant. Mehta until September 2021 had led the company’s acquisition and change program as president and chief operating officer.
How do you see the impact of the 3rd wave of Covid? Has Crisil revised his forecast?
If you see how the Omicron wave came about in South Africa, there was a rapid rise in infections, then a rapid spike. If this is what happens in India, we will see limited impact compared to the delta variant. Certainly, the contact-based service sector will be relatively more affected as people will reduce their trips and there will be fewer public events. Our GDP growth forecast for India for this fiscal year is 9.5%. We expect a negative impact in the fourth quarter due to Omicron and the high base effect. For the next fiscal year, we forecast 7.8% GDP growth. We expect a decisive recovery in the service sector, leading to widespread growth.

The markets held up well despite the 3rd wave … Is it only liquidity that drives values?
I have the impression that certain things have played out. The first, of course, is easy liquidity. The second is that through the pandemic, market shares have been consolidated. Small businesses have been the losers due to supply chain disruptions, funding issues and the lack of business continuity plans. Another interesting aspect is that consumers seem to focus more on quality and reliability than on price. That’s why you see that the top two or three companies in each industry are doing well.
As CEO, what are your priorities at Crisil?
If you look back, we’ve seen both organic and inorganic growth over the past few decades. Sustainable growth remains our cry of alarm. Regarding the priorities, I would like to highlight three: Continue to attract and retain the best talent; be ready for the future; and, leveraging our institutional capabilities and data to deliver actionable intelligence to our clients. The other important priority is cyber risk.
Sebi requires rating agencies to track the end use of the IPO. How do you see this role?
Yes, this is a new area for us. This is something that banks and financial institutions (FIs) did earlier. I think this shows the regulator’s confidence in the ability of rating agencies to conduct such critical activity. We are working on our systems and processes to achieve this effectively.
Are companies more sensitive to downgrades due to the insolvency process?
That’s a great question, and I think it’s fair to assume that the Insolvency and Bankruptcy Code (IBC) has established a deterrent effect – that developers can even lose their businesses in debt if they stay. in default. This has improved credit discipline, and we see greater intention to service debt on a timely basis. When the pandemic started, there was talk of how things were going to get worse for businesses. But the timely interventions of the government and the RBI, lenders, and the companies themselves have mitigated much of the impact.
In addition, many companies have used their cash flow to reduce their debt. We can therefore say that companies have become more sensitive to default because the credit ecosystem is now much stricter towards defaulters. This is expected to help deepen the Indian corporate bond market where high priority is given to credit discipline.
On the other hand, issuers and borrowers in general tend to be sensitive to non-default downgrades. But mature organizations appreciate that downgrades only reflect the relative weakness of their ability to service debt on a timely basis.
What are the emerging trends that you see in the corporate sector?
Since the start of the pandemic, companies have invested in creating robust and diverse supply chains, accelerating digitization on the customer experience side and automating processes. The continued explosion of data is also driving increased demand for solutions based on AI and machine language.
I also see that sustainable development is quickly becoming an important program for companies. Banks and FIs integrate environmental, social and governance (ESG) factors into their risk frameworks for investment and lending decisions.
How do you see the push towards sustainability unfolding?
After investors and climate activists, consumers are also increasingly raising issues of sustainability. They say that it is not enough for a company to have good products. They want companies to adopt responsible practices such as ESG. However, the biggest challenge in India is the availability of relevant information.
Globally, regulators are striving to improve corporate disclosure standards. At Crisil, we focus on sustainable management and the availability of independent assessments, benchmarks and data. Last year, we launched ESG scores for 225 large listed Indian companies. We aim to expand our coverage beyond 1,000 companies. For global markets, we work with the best financial institutions on ESG integration through tailor-made research and analysis. We have made significant investments to be ready for the future and to grow sustainably.

Carol N. Valencia