Credit profile of India Inc improving, says S&P

Says companies are refocusing on cutting debt after fast expansion

Global ratings agency Standard & Poor’s (S&P) on Wednesday said an increasing focus by India Inc on lowering debt was likely to improve their credit profiles.

“More companies are improving high financial leverage and boosting their credit profiles by adopting measures such as sale of equity and assets or using their free operating cash flows to reduce debt... Focus on lowering debt will likely improve their credit profiles,” the report said.

The routes adopted by domestic companies included raising equity, selling non-core assets and in some cases divesting businesses, it said.

S&P credit analyst Mehul Sukkawala said economic gloom and high interest rates impacted debt-servicing ability and these were primary factors pushing companies towards this strategy.

In some cases, companies are refocusing on reducing debt after years of investing for growth.

Citing examples, the report said Tata Power’s outlook was recently revised to positive and Bharti Airtel’s rating was revised upwards after both companies started focusing on lowering debt.

While Tata Power announced a Rs 2,000-crore rights issue this month and raised $500 million through a stake sale in an Indonesian coal mine last quarter, Bharti raised $1.25 billion through an equity offering last year.

“We believe Bharti would continue to take measures such as sale of stakes in subsidiaries (such as Bharti Infratel) or non-core assets (such as tower infrastructure),” it said.

Tata Steel sold part of its holding in group company Titan in 2013 and also put up land in the northwestern suburb of Borivali in Mumbai for sale, S&P said, noting that it has deferred the second phase of a greenfield project in Odisha to focus on generating cash flow for the first phase.

Apart from that, many companies in the infrastructure sector such as GMR Infra with very high leverage are also considering selling assets or stakes in subsidiaries to improve their debt-servicing ability, financial flexibility and liquidity, it said.