Moody's raises rating outlook to stable for 18 Indian companies, banks

The nine companies whose rating outlook has been revised upwards are RIL, TCS, Infosys, ONGC, Petronet LNG, UltraTech Cement, Oil India, IOC and HPCL

Moody's Investors Service on Wednesday raised the rating outlook for 18 Indian corporates and banks, including Reliance Industries, Infosys, SBI and Axis Bank, to 'stable' from 'negative'.

This follows the upgrade by the US-based rating agency in India's sovereign rating outlook to 'stable' from 'negative' on Tuesday. The agency had affirmed the sovereign rating at 'Baa3'.

The nine companies whose rating outlook has been revised upwards are RIL, TCS, Infosys, ONGC, Petronet LNG Ltd, UltraTech Cement, Oil India, Indian Oil Corporation and Hindustan Petroleum Corporation Ltd (HPCL).

The agency also affirmed the rating on privatisation-bound Bharat Petroleum Corporation (BPCL), but maintained the 'negative' outlook.

The nine banks whose outlook has been revised to 'stable' are SBI, Axis Bank, Bank of Baroda, Canara Bank, Axis Bank, HDFC Bank, ICICI Bank, PNB, Union Bank and EXIM Bank.

"Stabilization in asset quality and improved capital are the main drivers of this rating action," Moody's said.

Also, the rating outlook has been revised to 'stable' from 'negative' on 10 Indian infrastructure issuers, including NTPC, NHAI, PGCIL, Gail, Adani Transmission and Adani Ports and Special Economic Zone Limited (APSEZ).

The International ratings agency on Tuesday kept India's sovereign rating at 'Baa3' -- which is the lowest investment grade, just a notch above junk status.

Following a deep contraction of 7.3 per cent in fiscal 2020 (ended March 2021), Moody's expects India's real GDP to surpass 2019 levels this fiscal year (April 2021 to March 2022), rebounding to a growth rate of 9.3 per cent, followed by 7.9 per cent in the next financial year.

In a statement on Tuesday, Moody's said "the decision to change the outlook to stable reflects Moody's view that the downside risks from negative feedback between the real economy and financial system are receding." With higher capital cushions and greater liquidity, banks and non-bank financial institutions pose much lesser risk to the sovereign than Moody's previously anticipated.

"And while risks stemming from a high debt burden and weak debt affordability remain, Moody's expects that the economic environment will allow for a gradual reduction of the general government fiscal deficit over the next few years, preventing further deterioration of the sovereign credit profile," it added.

It further said that solvency in the financial system has strengthened, improving credit conditions which Moody's expects to be sustained as policy settings normalise.

In addition, banks have strengthened their capital positions, pointing to a stronger outlook for credit growth to support the economy.