Moody's revises outlook on Indian corporates from negative to stable

Says better credit conditions await India Inc., lowered external vulnerability to reduce forex risk

After seeing trying times for long, Indian companies might record better credit conditions in 2015, owing to prospects of an economic recovery and pro-market policies, according to global ratings agency Moody’s.

The agency has changed the outlook on India’s corporate sector from negative to stable on expectations of an economic recovery and greater access to global capital markets. It also factors in successful implementation of pro-market policies, which will lead to improved corporate cash flows.

Reduced vulnerability on the external front was expected to cut foreign exchange risks for Indian companies, despite gradual interest rate normalisation by the US Federal Reserve, Moody’s said in its annual outlook for companies in Asia.

It said the outlook for non-financial companies in Asia (excluding Japan) was stable, owing to expectations of a gradual improvement in external demand (especially from the US), still-accommodative global monetary conditions and orderly economic rebalancing in China.

Against a supportive macroeconomic backdrop, most rated Asian companies would maintain sufficient liquidity and access to funds to manage their borrowing and refinancing needs, it added.

The outlook would likely turn negative if China’s property market and real economy failed to stabilise, with headline growth falling below six per cent, the agency said. The outlook could become negative if the normalising US monetary policy triggered a rise in regional borrowing costs and foreign-exchange volatility, leading to liquidity and refinancing concerns among Asian issuers.

Conversely, the outlook could turn positive if successful passage of economic reforms across the region, notably in China, India and Indonesia, led to improved growth quality, market liberalisation and higher productivity, Moody’s said.