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21
November 2016
The Indian corporate sector is expected
to log strongest profit growth in 2017 on the foundation of sustained economic
growth, capacity additions and higher commodity prices, said global credit
rating agency Moody's Investors Service.
The Total Investment & Insurance Solutions
The rating agency also said the credit quality
of Asian (excluding Japan) non-financial corporates that it rates will remain
stable in 2017, supported by steady macro conditions, a recovery of commodity
prices and adequate market liquidity. The
Total Investment & Insurance Solutions
"Moody's expects to see the
strongest profit growth among corporates in India (Baa3 positive), underpinned
by sustained economic growth, capacity add-ons and higher commodity
prices," Moody's said in its report 'Non-Financial Corporates -- Asia
(ex-Japan): 2017 Outlook -- Steady Macro Conditions and Commodity-Price
Recovery Support Stable Credit Quality'.
"We expect growth in global and
regional economies to stabilise in 2017, which will mitigate the risk of any
material deterioration in the credit quality of rated Asian corporates,"
said Gary Lau, a Managing Director in Moody's Corporate Finance Group. The Total Investment & Insurance
Solutions
"That said, we expect a continued
trend of modest negative-biased rating actions in 2017, mainly because of still
high financial leverage for many companies and company-specific reasons,"
Lau added.
As to Indian corporates, Moody's said
the gross domestic product (GDP) was expected to grow at 7.5 per cent, the
commissioning of new production capacities, stable commodity prices would
support EBITDA growth of 6-12 per cent over the next 12-18 months. The Total Investment & Insurance
Solutions
Moody's said corporate borrowings would
slow down on the back of project completions or nearing completion and the
refinancing needs would also become easy owing to better cash balances and
access to funds. The Total Investment
& Insurance Solutions
According to Moody's, the upside for
Indian corporate sector was the implementation of the Goods and Services Tax
(GST), structural reforms and improvement in commodity prices.
An improvement in valuation of assets
would provide de-leveraging opportunity to corporates.
However on the downside, Moody's said
that GDP growth falling below six per cent, increased competition, large debt
funded acquisitions or capacity additions, higher interest rates due to
inflation and exchange volatility may result in contracting profits and tight
funding situation.The Total Investment
& Insurance Solutions
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