Moody’s-ICRA gives stable outlook for Indian non-finance corporates

Chennai, Jan 4 (IANS) Global credit rating agency Moody’s Investors Service and its Indian affiliate ICRA Ltd on Wednesday said their stable outlook for Indian corporates (non-financial) is based on India’s sustained economic growth.

In a statement, Moody’s said the outlook for non-financial corporates in India over the next 12-18 months reflects in large part the country’s sustained economic growth.

“Strong GDP (gross domestic product) growth, capacity additions and stabilising commodity prices will support EBITDA (earnings before interest, tax, depreciation and amortisation) growth of 6-12 per cent over the next 12-18 months,” said Laura Acres, Managing Director in Moody’s Corporate Finance Group.

According to Moody’s, the capex cycle for Indian corporates has peaked with projects nearing completion and borrowing pace will slow down over next 12-18 months.

“Moreover, refinancing needs are manageable for most corporates in 2017, given their better access to the capital markets and large cash balances,” Moody’s said.

“As for specific sectors, our outlook for the power, hotel and sugar industries is stable, while that for the real estate and cement sectors is negative,” said Subrata Ray, Senior Group President and Head of Research for ICRA.

ICRA said its outlook on the cement sector is negative, because cement demand growth – which has stagnated around the mid-single digit over the last few years – will likely be further negatively affected by demonetisation through the real estate sector, which is a major consuming segment.

It noted that cement prices have fallen across regions following demonetisation and this situation, combined with increased input prices, such as petcoke and rising freight costs, will adversely affect profitability.

As for the auto sector, Moody’s said that its outlook for the industry is stable, because companies in this industry should benefit from improving customer sentiment, following an above-average monsoon season, as well as likely falling vehicle prices, after the implementation of the Goods and Services Tax in April 2017 that will replace a web of taxes.

In the near term, however, sales volumes could be negatively affected by demonetisation.