Rubix analysed the extent of risk deterioration in the 9,963 business entities to check how many of the three risk variables it monitors, namely, GST compliance, provident fund compliance and external credit rating had deteriorated for each of the companies.
It found that 39% of the total business entities (3,843 firms) saw a deterioration in any one of the three risk variables in Q1 FY 2022, 10 percentage points higher than the previous quarter in which only 29% of the business entities saw a deterioration in any one risk variable.
The more the risk variables in which there is a deterioration, the higher is the risk associated with the business entity.
Also, 4% of the business entities saw a deterioration in two risk variables in Q1 FY 2022 compared with only 1% in the fourth quarter of the fiscal 2021. 14 business entities witnessed a deterioration in all three risk variables in the first quarter of fiscal 2022 compared with only two in the prior quarter.
Kaushal Sampat, founder of Rubix Data Sciences said, the analysis indicates a worsening risk environment due to restrictions imposed by various states to combat the second wave of Covid.
“This is in line with the forecast in our Q4 fiscal 2021 Quarterly Risk Transition report. We expect to see an improvement in the risk environment in Q2 FY 2022 (July – September 2021) led by the easing of Covid restrictions and prospects of a good monsoon,” Sampat said in a release.
At the end of every quarter Rubix compares the data of how Indian business entities in its monitoring portfolio have performed versus the prior quarter, from a statutory compliance and credit rating perspective. Key parameters being monitored each quarter are GST, provident fund filings and credit ratings.
The 9963 business entities being monitored belong to more than 35 sectors of the economy. After the first quarter, the Rubix GST compliance score of 3,177 business entities (32% of the total number being monitored) deteriorated between Q4 FY 2021 and Q1 FY 2022, higher than the 22% that had witnessed a drop in the previous quarter.
“This clearly indicates that the financial health of nearly one-third of business entities being monitored continued to deteriorate in Q1 FY 2022, suggesting higher risk levels in the quarter,” Rubix said.
On PF compliance, 40% of the business entities monitored deteriorated between Q4 FY 2021 and Q1 FY 2022 compared with the prior quarter where only 29% of the business entities witnessed a drop. The percentage of business entities that witnessed a deterioration in their PF compliance Score in Q1 was second only to percentage of business entities (55%) whose PF score deteriorated in Q1 FY 2021, at the height of the first wave of the pandemic.
A deterioration in any of the above parameters for the business entities should raise red-flags and serve as early warning signals for those monitoring the portfolio.
