Moody’s retain outlook for non-fin firms

Mumbai: Rating agency Moody’s Investors Service has maintained a stable outlook for non-financial corporates on hopes that a recovery in GDP growth would result in higher sales volumes.

However, it has maintained its negative outlook on the telecom sector where intense competition and high level of debts are putting pressure on cash flows.

“Our stable outlook is underpinned by the expectation that GDP growth of around 7.6 per cent will result in higher sales volumes, which along with new production capacity and stabilising commodity prices, will support EBITDA growth of 5-6 per cent over the next 12-18 months,” said Laura Acres, MD at Moody’s Corporate Finance Group.

The agency believes that further simplification of GST and other structural reforms along with an improved commodity prices could result in higher EBIDTA growth and provide means for deleveraging for some corporates.

For oil refining and marketing companies, Moody’s said its stable outlook is based on the consideration that capacity additions and higher refining margins will increase earnings even as marketing margins may remain stable.

While high dividend payments remain a concern, it added that if the GST net is widened to petroleum products, it would be a credit positive for the sector.

On base metals, it said that improved fundamentals and supply deficits in certain metals would support stable prices over the next 12-18 months. While base metal pricing premium is expected to narrow, higher production from capacity additions and cost rationalisation measures would drive earnings expansion.