Global rating agency Moody’s Investors Service on Thursday predicted that a robust growth outlook of the Indian economy will support the credit quality of the country’s non-financial corporate sector.
Moody’s Indian affiliate ICRA said India’s power sector will continue to remain stable despite mixed success of its distribution utilities (DISCOMS).
It said that improved domestic coal availability is primarily responsible for ensuring a stable power sector and that India is taking steps to align its power generation mix with nationally determined contribution commitments under the December 2015 Paris Accord.
As regards the oil and energy sector, it said, “credit quality of state-owned oil and gas companies will remain positive but could change depending upon the government’s responses to increasing oil prices.”
It warned that there was need for having a balance between high dividends and earnings to ensure against a credit negative slip. It also said that credit ratings of state-owned upstream companies would remain well positioned so long as their net realized prices do not fall below the USD 50 per barrel mark.
“India’s focus on greening its energy mix would imply strong growth for renewable energy over the next many years,” said Moody’s Vice President Abhishek Tyagi
Vikas Halan, Senior Vice President of the ratings agency said, “As disruptions from GST implementation fades, economic activity will recover in India. GDP growth of 7.3 percent for 2018 in India, will result in higher domestic sales volumes, which along with new production capacity and supportive commodity prices, will EBITDA, growth for corporate over the next 12 to 18 months.”
Moody’s, however, cautioned that Indian non-financial firms will continue to face protectionism and tighter monetary controls in the United States because of the depreciating US-Rupee exchange rate (Currently pegged at six percent). It also said that ongoing volatility in international bond markets could make refinancing challenging, particularly for high yield corporate. It also said predicted a further weakening of domestic bank funding because of fresh asset quality and governance issues.
As far as the telecom sector is concerned, Moody’s pained a gloomy picture, saying it would remain under pressure because of intense competition between stakeholders.
“Capital spending will remain high for telecom operators as they expand and upgrade their (respective) network to service the exponential increase in high speed wireless data consumption in India,” it said.
Biddings for solar projects, it said, have seen a drop, given concerns over long-term tariff-related viability
It said that other sectors such as automobiles, consumer staples, durables and hospitality have witnessed a revival and marginal expansion because of rising consumer demand.
It was all praise for the highways sector, saying that government support for existing PPP procurement models has been a crucial factor in attracting private sector investment.
Going forward, it said that the corporate sector could be impacted by growing formalization and a tightening of regulatory norms. It cited the Real Estate Regulatory Authority (RERA) as an example of sectoral consolidation as also stricter emission norms in the automobile sector for this premise.
It said that rural demand would be critically dependent on having a normal monsoon, hike in minimum support price and emphasis on agri-economic policies in the run-up to next year’s general elections.

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