Risk Analytics System
Heckyl’s Risk Analytics System (RAS) has shown that the 11 out 50 Nifty companies have earned negative risk scores. The list of companies having negative risk scores was topped by Zee Entertainment, followed by Vedanta and Mahindra & Mahindra.
On the other hand, the Heckyl risk score has been the strongest for HDFC Bank in Nifty 50 companies. HDFC Bank was followed by HCL Technologies and Bajaj Finserv.
RAS is a useful tool for corporate lenders to get a 360-degree view on the portfolio companies through analysis of traditional and alternative data modules.
Zee Entertainment’s risk score turned negative in September last year. Since then, the risk score for Zee Entertainment has been on the downtrend.
A further deep-dive into the break-up of risk score in RAS has shown that the negative 100 scores for ownership, credit ratings and stock price modules have dragged Zee Entertainment’s overall risk score lower. Moreover, negative scores for directors and provident fund modules also weighed on the risk score.
RAS is the first of its kind innovative application that helps corporate lenders to get a 360-degree view on the portfolio companies through analysis of traditional and alternative data modules.
The manufacturing sector accounts for just one fifth of the global economy and its share is shrinking further in developed countries. Yet, the investing community spends much time on assessing the health of the sector. The manufacturing sector, being at the forefront of economic activity, provides the direction in which the overall economy will go. This explains why the manufacturing sector grabs the attention of the investor community.
The business surveys on the manufacturing sector have often helped in providing first reliable signals of turning points in the economy. One such key indicator is the manufacturing PMI which shows what the participating purchasing managers think about future capex, job creation and overall demand of goods.
A steep contraction in the latest manufacturing PMI numbers for April wasn’t surprising given the prevalent worldwide lockdown to tackle COVID-19 pandemic. However, a contraction of 20-30% versus a contraction of 50% should be looked upon separately.
While among the major economies, the manufacturing PMI numbers have contracted for all. However, the shrinkage of almost 50% in India’s April manufacturing PMI was steepest among the top 10 economies. This shows the damage caused by the lockdown has far deeper consequences on the Indian economy than its developed counterparts.
Companies from consumer services, industrials and financial sectors lead drop in PF score in FY20
Publicly available data from Employees’ Provident Fund Organization (EPFO) is one of the datasets that can be very useful to gain unique insights in the assessment of credit risk. In our view, a significant delay in monthly Provident Fund (PF) payment is a potential red-flag as the delay could be due to liquidity crunch faced by the company. Moreover, a substantial drop in the number of employees or amount paid for PF is also a potential red-flag as it signals layoffs or job cuts to reduce the company’s operational cost.
Heckyl’s Risk Analytics System (RAS) has several business rules to identify such red-flags from PF data. Based on the rule output of the PF module for the company, Heckyl system computes the PF score.
Heckyl study on PF data for 1,000 companies has shown a drop in the PF score for 540+ companies during the financial year 2020. The companies from consumer services, industrials, financial institutions, commercial services and chemical sectors have led the drop in the PF score for the FY20.
Moreover, 310+ companies, which have witnessed a fall in the PF score, have subsequently seen declined in the scores for other modules of RAS such as Financial, Charges, Credit Rating, Directors, Ownership, and GST. Read the rest of this entry »