S&P revises outlook on ten Indian companies to 'stable' from 'negative'

NEW DELHI: Along with revising India's credit rating outlook, S&P on Friday also revised its outlook on six Indian companies to stable from negative and affirmed the ratings. The outlooks of Reliance Industries, Oil and Natural Gas Corporation Ltd, Power Grid Corporation of India, NTPC, NHPC and TCS were revised to stable, while maintaining their respective ratings.

"We have revised the outlook on Reliance to reflect the reduced likelihood that we may lower our transfer and convertibility (T&C) assessment following the sovereign action. We rate Reliance above the sovereign because of the company's large cash balance, the fact that most of the cash flows are linked to foreign currency, and our assessment that its stand-alone credit profile is 'bbb+'," S&P said. "At the same time, we believe the company continues to be exposed to the T&C risk of India, which we assess as 'BBB+', given that most of its operations are based in the country," it added.




Explaining the rationale for revising the outlook on four government-related entities - ONGC, PowerGrid, NTPC, and NHPC - S&P that this was done to reflect the sensitivity of these entities to the sovereign credit rating on India, given their very strong relationship to the government. "We expect the government to maintain its majority ownership, and influence the business and financial strategy of the companies," it said.

Talking about TCS, S&P said it revised the outlook on the foreign currency rating on TCS following similar action on the sovereign. "The rating can be up to four notches higher than the foreign currency sovereign credit rating on India. TCS' global service-delivery capability, strong EBITDA margins, robust and stable cash flows, and net cash position enable the company to maintain positive liquidity under our hypothetical sovereign and T&C stress scenarios," it explained.

S&P also revised the outlooks on four other government-related entities - Export-Import Bank of India, IIFCL, Indian Railway Finance Corp and Power Finance Corp - to stable from negative. At the same time, Standard & Poor's affirmed the 'BBB-' long-term issuer credit ratings on these entities.

"We have equalized the ratings and outlooks on India EXIM, IIFCL, and IRFC with the sovereign rating and outlook. This reflects the entities' integral linkages with, and their critical roles to, the government of India. We believe there is an "almost certain" likelihood of extraordinary government support to these GREs," S&P said.

"We view PFC's link to the government as very strong and its role as critical. We therefore assess an "extremely high" likelihood of extraordinary government support to the company. Such a level of support, combined with PFC's stand-alone credit profile, results in a rating that is at the same level as the rating on India," it added.