The credit profile of mid and small corporates may deteriorate in the near-to-medium termdue to prolonged low revenue growth and lower operating leverage, India Ratings and Research said in a report on Monday.

“The improving trend in credit profile of mid & small corporates (revenues below Rs 1,000 crore) seen until FY23, could reverse in FY24 and beyond,” the report said.

India Ratings and Research defines mid and small corporates as entities that clock a revenue below Rs 1,000 crore.

On the flip side, the credit rating agency notes that large corporates are better placed and that a reversal, if any, could be limited.

The gap between the credit profiles of large and mid-level corporates widened during April-September.

While large corporates have also seen lower revenue growth during the first half of the current financial year, higher operating margins and stable working capital cycle have ensured sufficient cash flow generation, the credit rating agency said.

Going ahead, the impact of prolonged low revenue on credit profiles will be keenly watched.