Driven by sluggish economic growth and slowing earnings, credit conditions will weaken for most Indian non-financial companies in 2020, Moody's Investors Service said on Thursday. "Rated companies’ credit profiles are unlikely to improve significantly over 2020-2021 due to elevated debt levels, weakening profitability and the continued economic slowdown, which is pressuring both investment and consumption," Kaustubh Chaubal, a Moody’s Vice President and Senior Credit Officer said.
The continued depreciation of the rupee against the US dollar, meanwhile, has limited negative credit implications for rated companies, as most have natural hedges in place. Overall, refinancing risk for long-term debt maturities remains manageable for most rated companies, although they are reliant on continued annual rollovers of short-term working-capital financing.
"Upside factors for Moody's outlook on India’s non-financial companies include a ramp up of government’s stimulus measures aimed at reviving consumption demand, and better funding and market liquidity conditions whereby domestic demand and consumer funding both get a boost," it said.
Moody's expects India's GDP growth to slow to 6.6 per cent in 2020, weaker than in previous years, with limited prospects for government stimulus measures to improve credit conditions in the near term.
Funding conditions also remain tight, slowing demand for consumer goods and leaving banks selective in extending loans to companies.
However, the US-based agency said infrastructure companies’ strong market position and essential nature of services will position them well to weather the weakening economy.
"Conditions will remain stable for the infrastructure sector, supported by strong market positions and long-term contracts with availability-linked revenue, where they get paid in full regardless of product demand as long as they can deliver the full contracted service, Moody's Investors Service said.
Infrastructure issuers’ credit quality will remain stable, it said. Industry outlooks reflect Moody's view of fundamental business conditions for industry over the next 12-18 months.