Moody’s Investors Service today said Indian businesses will see strongest profit growth over the next 12 to 18 months on the back of sustained economic expansion and project completions.
However, downside risks to this projection stem from GDP growth falling below 6 per cent and/or weakening of commodity prices resulting in lower EBITDA growth.
In its report on non-financial corporates, Moody’s said it expects to see the “strongest profit growth among corporates in India underpinned by sustained economic growth, capacity add-ons and higher commodity prices”.
This projection for corporates is based on expectation of India clocking a GDP growth of 7.5 per cent. Also, the commissioning of new production capacities and stabilising commodity prices will support EBITDA growth of 6-12 per cent over the next 12 to 18 months, expects Moody’s.
It said refinancing needs in 2017 will be manageable for most corporates, given their better access to capital markets and large cash balances.
Downside risk, the US-based agency said, with regard to telecom companies stems from intensifying competition as it could lead to lower earnings growth or increase in capex for some sectors. Besides, large debt-funded acquisitions or capacity additions that will result in weaker credit metrics could lead to downside.
Also, higher interest rates brought on by rising inflation and/or exchange-rate volatility, resulting in a tight funding environment could act as downside risk, Moody’s said.
Moody’s had last week affirmed India’s sovereign rating at ‘Baa3’ with a positive outlook, saying it expects policymakers to continue reforms to achieve balanced growth and reduce the government’s debt load.
The positive outlook denotes Moody’s expectation that, over time, India’s credit metrics will likely shift to levels consistent with a ‘Baa2’ rating, it had said.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.