The credit profiles of rated non-financial companies in India will continue to improve through 2019, despite external headwinds, according to a new report.
In a recent note to its clients, rating agency Moody’s said India (rated Baa2 stable) will see growth in steel, mining and auto sectors which will benefit from strong GDP growth. The growth would come despite external risk, which will in turn support domestic demand, the agency added.
Saranga Ranasinghe, a Moody's Assistant Vice President and Analyst, said revenue will continue to grow for most Indian industries. "As for the rupee's depreciation against the US dollar, such a situation will have limited negative credit implications for rated Indian corporates because most rated Indian-based corporates have protections in place - including natural hedges, some US dollar revenues and financial hedges."
The rating agency also said that refinancing risk will be manageable for most Moody's-rated Indian corporates.
On the telecommunications sector, Moody's says that these companies' capital spending levels, and therefore leverage, will stay high, absent inorganic deleveraging initiatives, due to intense competition.
India's downstream oil refiners too will see elevated levels of capital spending as they look to increase refining capacity in line with demand growth.
As for oil companies and the IT services industry, Moody's noted that these companies' high shareholder returns could lead to a rise in debt levels and leverage.
With the steel and auto suppliers sectors, the agency opined that industry consolidation for companies in these sectors will continue through 2019. While this would lead to improved business profiles, any debt funded acquisitions may lead to elevated leverage levels.
