Corporates' credit profiles to improve on sustained eco growth

The credit profiles of the non-financial corporates is expected to improve in 2017, on sustained economic growth and project completions, Moody's said here.

Moody's Investors Service said that the credit profiles of the non-financial corporates that it rates in India (Baa3 positive) will improve in 2017, supported by sustained economic growth and project completions.

"GDP growth of 7.5 per cent, capacity additions and stabilising commodity prices will support EBITDA growth of 6-12 per cent over the next 12-18 months," Moody's Corporate Finance Group Managing Director Laura Acres said in a statement here.

"The capex cycle for Indian corporates has also peaked as projects are near completion, and declining investments will slow the pace of borrowing over the next 12-18 months. Refinancing needs are also manageable for most corporates in 2017, given their better access to the capital markets and large cash balances, Acres said.
 

Moody's conclusions are contained in its just-released 2017 outlook presentation for Indian non-financial corporates.

By sector, Moody's stable outlook for exploration & production companies reflects higher production volumes, low subsidy burdens and a recovery in oil prices, which will offset lower natural gas prices and higher royalty payments.

In the refining & marketing segment, capacity additions will partly offset weaker refining margins, while marketing margins will remain stable.

Moody's expects stable outlook for the domestic telecommunication companies, which are facing intensify competition, which will pressure margins, but should be offset by growth in data consumption.

In the real estate sector, Moody's expects sales volumes to be negatively affected because of demonetization but volumes will start to pick up as interest rates decline.

Moody's stable outlook for the ferrous and non-ferrous metals & mining segments reflects its expectation for earnings growth, supported by higher production volumes.

Companies in the auto sector should benefit from improving customer sentiment following an above-average monsoon season, as well as from expected falling vehicle prices following 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 get negatively affected by demonetisation, it said.