BLOG — Aug 08, 2025
India's Credit Risk Landscape: Insights from Consumer Products
The consumer products sector is the heartbeat of everyday life. From the food on our tables to the clothes in our closets and the essentials in our homes, this sector touches nearly every aspect of daily living. But when economic uncertainty looms, the financial health of companies in this space becomes more than just a business concern. That’s why understanding credit risk in this sector isn’t just smart—it’s essential.
S&P Global Market Intelligence’s RiskGauge™ is a tool that combines different risk factors - like financial health, market trends, and social-economic conditions - to estimate the chance of default, expressed as probability of default, also mapped to a credit score. This gives a complete picture of a company's creditworthiness. RiskGauge™ can also be used in monitoring and alerting systems to quickly spot areas with raising credit risk at company-level or country and industry level.
S&P Global Market Intelligence developed an Early Warning Signal (EWS) framework that is built to help credit practitioners by providing timely warning signals for early detection of entities with genuine risk of default. The EWS checks the RG PD score every day and uses simple rules to spot any signs of rising credit risk. It shows these signals using an easy-to-understand traffic light color scale,[1] where different colors indicate the level of risk of default. This helps stakeholders make smart decisions based on the company’s financial health.
Figure 1 illustrates the median RiskGauge™ probability of default of over 1000 public companies in the consumer products sector across various countries in the Africa, Middle East Asia, and India region. From 2019 to 2022, public companies in the consumer products sector encountered significant financial challenges. The graph depicting the median PD values for this sector shows notable increase in the PD values during 2019 and 2020, particularly for Indian and sub-Saharan African countries. These fluctuations reflect the broader economic conditions, including reduced consumer spending, supply chain disruptions, and heightened competition.
Figure 1: RiskGauge median benchmark for public companies in Consumer Products sector
Source: S&P Global Market Intelligence as of May 1, 2025. For illustrative purposes only.
Compared to similar countries in the Middle East and North Africa, India exhibited a concerning trend in median PD, particularly in 2020, when the pandemic hit. However, it is important to note that a high median PD does not imply that all companies within that sample are at higher risk of default; rather, it indicates that companies with a PD greater than the median have an increased risk of default. By 2022, Indian companies showed signs of recovery, with the median PD improving relative to countries in other regions. This improvement in India can be attributed to several factors, including government stimulus measures, a rebound in consumer demand, and a gradual stabilization of supply chains.
In addition to showing the PD scores overtime, our EWS tool checks daily the RG PD score and uses simple rules to spot any signs of rising credit risk. It shows these signals using an easy-to-understand traffic light color scale,[1] where different colors indicate the level of risk of default. This helps stakeholders make smart decisions based on the company’s financial health.
Let’s now look at a specific Indian company in the consumer products sector to show how the EWS framework works with the RiskGauge score to offer a forward-looking view into potential signs of distress. For reference, we have also displayed the company’s stock price. Sintex Industries Ltd, established in 1982 and headquartered in Gujarat, India, is a leading manufacturer of plastic products and textiles. Analyzing the credit score trends from January 2017 to October 2019 reveals a concerning decline. As shown in Figure 2, the company's credit score deteriorated between early 2017 and mid-2018. We notice the EWS consistently showed amber color starting in July 2017 and eventually turning red during April 2018, indicating heightened default risk. Notably, even though the credit score showed a rapid decrease in mid-2020 due to the onset of COVID-19, the EWS did not shift to yellow. This demonstrates the strength of the EWS, as it utilizes dynamic thresholds rather than static ones, allowing it to provide more accurate signals about companies that may genuinely face default risk, even when the broader market is under pressure. Although the company's stock price has been on a downward spiral, the EWS stands ready to pinpoint when this decline enters alarming territory, enabling us to distinguish between routine stock price fluctuations and urgent credit risk alerts.
Figure 2: Historical evolution of credit risk for Sintex Industries Ltd
Source: S&P Global Market Intelligence as of Apr 10, 2025. For illustrative purposes only.
Several factors contributed to Sintex Industries Ltd.'s financial distress, chief among them were liquidity challenges stemming from rising debt levels that outpaced revenue growth. Operational inefficiencies in production and supply chain management further strained the company’s financial health. Additionally, intense competition from both domestic and international players eroded market share and profitability. The mounting debt burden, coupled with a downturn in sales, ultimately led to the company's inability to repay its creditors, triggering insolvency proceedings.
The case of Sintex Industries Ltd exemplifies the critical need for vigilance in assessing credit risk and the potential consequences of neglecting early warning signals. The progressive stress phase experienced by companies underscores the importance of robust risk assessment tools like RiskGauge and EWS. By continuously monitoring credit conditions, stakeholders can make informed decisions to navigate challenging economic landscapes.
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