Moody's has assigned a provisional Baa3 rating to NTPC's USD 4-billion medium-term note (MTN) programme.
Any note issued under the programme will rank with all other senior unsecured debt issued by NTPC, Moody's said in a release.
According to a statement, the provisional rating assigned is in line with NTPC's existing Baa3 issuer rating.
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NTPC's Baa3 reflects its baseline credit assessment (BCA) of baa3. The rating does not factor in any uplift from the Indian government due to the high baa3 BCA relative to the Baa3 sovereign rating.
"Nevertheless, we believe that the Indian government will provide strong support in the event that extraordinary financial support is required, particularly in light of its about 70 per cent ownership of NTPC," it said.
NTPC's standalone credit strength reflects its dominant position in India's power sector, solid financial profile for its rating level, and strong liquidity position. Furthermore, strong and sustainable growth evident in India's electricity demand supports the company's operating profile and its dominant position as a low-cost producer.
The rating also incorporates the implementation risk associated with the company's largely debt-funded capex programme that "constrains" its BCA.
NTPC's rating could be upgraded provided India's sovereign rating improves and the company's underlying credit quality remains in line with its current BCA of baa3, it said.
Downward pressure on the rating could emerge if there are unfavourable regulatory developments such as tariff reduction, which could negatively affect the company's financial position. A sovereign downgrade could also impact the rating negatively, it added.
Although NTPC's financial profile remains strong, it has been weakening as a result of incremental capex to support capacity expansion.
A rating downgrade is possible if the government reduces its interest in NTPC to below 50 per cent, or evidence emerges of a weakening in government support, it added.
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Moody's said real estate, auto and steel sectors are picking up after demonetisation prompted weakness in sales.
"We expect that trend to continue over the second half of this year. Steel production also took a substantial hit but rebounded quickly and is performing better than we anticipated.
"Meanwhile, demonetisation has had little impact on India's rated oil and gas refining and marketing companies," it said.
As per the data released by Central Statistical Organisation yesterday, Indian economy grew by 7 per cent in the October-December quarter, despite demonetisation. It projected economy to grow by 7.1 per cent in 2016-17.
OnNovember 8, the government scrapped Rs 500 and Rs 1,000 notes, which accounted for approximately 86 per cent of the banknotes in circulation by value.
"The recovery in the total stock of currency in public circulation, which had declined from about Rs 17 lakh crore before demonetisation to a low of Rs 7.8 lakh crore in early December, before rebounding to about Rs 9.8 lakh crore in early February 2017, illustrates this incremental improvement in liquidity," Moody's said.
