Profitability of corporates is likely to be sluggish next fiscal, growing about 9 per cent, and the performance of commodity selling and investment-linked companies is likely to remain subdued, India Ratings and Research (Ind-Ra) said today.
In a statement, Ind-Ra said it expects only a moderate recovery in the operating performance of Indian corporates in 2016-17, driven primarily by domestic factors.
A continued divergent trend is expected with the performance of commodity selling and investment-linked companies remaining subdued and those of commodity users and consumption-linked companies improving modestly, it added.
In the absence of external shocks, Ind-Ra said corporate profitability (EBITDA) in 2016-17 is likely to grow only 7-9 per cent year-on-year.
"The sluggish EBITDA growth would keep the aggregate leverage levels of the top 500 corporate borrowers high," it said.
The rating agency said external risks such as the slowdown in China that has had a significant bearing on commodities as well as currency markets could impact the fragile recovery in the credit profile of corporates.
Manufacturing activity is likely to pick up somewhat, however, service sector corporates will continue outperforming corporates in the manufacturing space.
"The benefits of lower commodity prices for some sectors are likely to fade away in 2016-17, however, lower interest costs could support corporate profitability on a broader basis.
"Given the stability in working capital, currency risk could be the biggest challenge for Indian corporates in 2016-17," Ind-Ra said.
