Moody's says 6 Indian cos out of potential fallen angels list

NEW DELHI: Rating agency Moody's Investors Service, which recently changed India’s outlook to stable from negative in early October, said that the number of 'potential fallen angels' in India has dropped by six.

Five of the companies are government-related oil-and-gas companies, whose outlook changed to stable following the sovereign action, reflecting state ownership or close links with the government.

Out of the five companies, three are government-related issuers (GRIs) – ONGC, Oil India and IOC. Other two included HPCL and Petronet LNG. The sixth company is UltraTech Cement.


"We stabilised HPCL outlook because its ratings incorporate our expectation of support from the government of India through ONGC. Petronet LNG Limited 's rating was also stabilised following the rating actions on key counterparties, including IOCL and BPCL," Moody's said.

Cement producer UltraTech Cement is the sixth India-based company that left the potential fallen angels list. The company's ratings are capped at India's sovereign rating.

Moody's, meanwhile, said that the outlook on BPCL's ratings remains negative and reflects uncertainty around its ownership, capital structure, liquidity and management control given the ongoing process by the government to sell its stake in the company.

As a result, BPCL remains on the potential fallen angel list.

The overall Moody's Asia list, excluding Japan and Australia, has 12 potential fallen angels with BPCL being the only India firm, down from 19 at the end of September.

The 12 potential fallen angels have around $28 billion of bonds outstanding; around $3.2 billion is due by year-end 2022 (based on earliest put date): Refinancing would likely be more costly for these companies if their ratings were downgraded to high yield.

"Moreover, fallen angels have the potential to crowd out lower rated companies, which would raise debt-service costs and refinancing risk for some such companies. This scenario would drive credit differentiation, with refinancing risk for weaker and highly leveraged companies likely to rise," Moody's said.

"Potential fallen angels account for around 5 per cent of investment-grade companies: This is down from a high of 9.7 per cent (or 20 companies) reached during the height of the pandemic in 2020. The effects of the pandemic are easing and economic recovery is taking shape, supporting a decline in potential fallen angels," it said.