Domestic rating agency Crisil on Thursday said close to two-thirds of its rated entities would be eligible for one-time loan restructuring based on the proposed norms by K V Kamath Committee.
Earlier this week, the Reserve Bank of India broadly accepted Kamath Committee recommendations.
The panel specified five financial ratios and sector-specific thresholds for resolution of COVID-19-related stressed assets in 26 sectors, including auto components, aviation and tourism.
Crisil studied its rated portfolio of more than 8,500 companies after sorting them by rating, sector and moratorium availed.
The broad-level assessment is based on financial projections and excludes small and medium enterprises (SMEs) and financial sector companies, the rating agency said in a note.
"Nearly two-thirds of the companies rated by CRISIL would be eligible for one-time debt restructuring based on the parameters proposed by the K V Kamath Committee set up by RBI," it said.
The rating agency's senior director Subodh Rai said three out of four investment-grade companies (rated Crisil BBB- or higher) and one out of two in the BB rating category qualify for restructuring of loans.
However, in the Crisil B category, only one in three qualify because companies here tend to have relatively weak debt protection metrics.
"At an aggregate Crisil portfolio level, two out of three companies were found eligible for restructuring," Rai said.
The committee submitted its recommendations for 26 sectors. For others, it said lenders should make their own internal assessments, but mandated that the current ratio and debt service coverage ratio (DSCR) should be above 1 time and average DSCR above 1.2 times.
While this will help identify eligible companies, the decision to restructure will be a function of company performance, the agency said.
It said while the parameters support debt restructuring across rating categories, the study indicated that companies in the resilient sectors stand to benefit more.
Three out of four rated companies in the resilient sectors such as construction, chemicals, pharmaceuticals, iron and steel manufacturing, corporate retail, and consumer durables/FMCG will qualify for restructuring, the agency said.
In the less-resilient sectors such as auto dealerships, gems and jewellery, hotels, restaurants and tourism, power generation, and real estate, opportunities for debt restructuring could be a little lower as they can take longer to recover to pre-pandemic business levels, it noted.
Restructuring will also be available to a large number of companies that opted for the moratorium, it said, adding "every second company in the Crisil-rated portfolio that did so will qualify for restructuring".
According to the rating agency's director Rahul Guha, the situation is still evolving and actual number of eligible companies could increase in case of favourable developments such as faster than expected turnaround of the economy, banks choosing to convert interest charges to funded interest term loan or exploring other innovative ways of restructuring or promoters bringing in capital.
"A final picture on how many companies have qualified for restructuring will only emerge over the next 3-4 months," Guha said.
The agency said it will factor in the impact of debt restructuring on its rated credits as and when the process is initiated and will take a view on a case-to-case basis.