Rating agency Fitch Ratings expects India’s resilient GDP growth, limited exposure to the slowdown in overseas markets, generally adequate corporate balance sheets and supportive industry conditions in some cases will support a stable or improving outlook for rated Indian corporates.
In a note on January 12, the rating agency said margins will improve for most companies in FY24 after softness in FY23. Rating headroom will remain adequate despite high Capex.
Fitch expects India's GDP growth to moderate to 7 percent in FY23 from an 8.7 percent recovery in FY22 from the pandemic.
A modest reliance on slowing overseas markets, coupled with consumption and investment recoveries, will support sustained GDP growth of between 6-7 percent over the next few years. Steady economic growth and the state’s higher Capex to boost infrastructure will underpin sustained demand growth in the cement and steel sectors, said the rating agency.
Fitch believes the pharmaceuticals sector should see steady growth, due to its non-discretionary product nature and supportive industry trends, despite its significant reliance on exports.
Besides, it believes the production boost from easing supply chain constraints and healthy growth in the domestic market will help auto suppliers to counterbalance inflationary pressure on demand in overseas markets.
Moreover, weaker overseas demand will slow revenue growth in the IT services and chemicals sectors. However, Fitch added that this is unlikely to affect the solid rating headroom of rated IT services companies.
Supportive industry conditions will underpin steady profitability in chemicals. Economic growth will support higher power and petroleum product sales while growing industry consolidation should benefit rated telecom companies, said Fitch.
Stabilising profitability in FY24 will support rating headroom and sound financial flexibility at most rated corporates, notwithstanding the pressure on free cash flow (FCF) generation from high Capex, Fitch said.
Fitch expects India’s bank credit growth to remain reasonably robust in FY24.
Disclaimer: The views and recommendations given in this article are those of the rating agency. These do not represent the views of MintGenie.