India Inc: Moody’s says non-financial corporate sectors to grow rapidly

CHENNAI: With India Inc growing at a brisk pace, Moody’s on Thursday assigned a ‘stable’ outlook for the non-financial corporates in the country. The global credit rating firm, however, said its outlook on the telecom sector is ‘negative’.

It expects the telecom sector to continue to reel under heavy debt over the next 12-18 months. Intensifying competition will continue to put pressure on revenues and margins of the sector leading to further consolidation to create a three-player market — Vodafone/Idea, Bharti Airtel and Reliance Jio, said the report.

“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 2-3 years,” stated Laura Acres, managing director at Moody’s.

Moody’s also believes reforms such as GST rollout and other structural reforms may begin reaping benefits throughout the year resulting in higher Ebitda growth and providing means for de-leveraging for some corporates. Maintaining a ‘stable’ outlook on India’s steel sector, Moody’s expects consumption to grow in the mid-single digits over the next 12-18 months. It expects the sector, too, to witness consolidation.

IT services companies will remain stable, noted Moody’s, and will continue to drive growth with its offerings to Western economies and the fast pace of technology change will require investments or acquisitions. While demand for outsourced IT services will continue, emerging technologies will grow faster than rest of IT outsourcing, it added.

ICRA outlook

The global credit rating firm’s Indian arm ICRA has a negative outlook for real estate sector over the near- to medium-term, while it has assigned stable outlook for sectors including passenger vehicles, construction, cement, and textiles.

The real estate sector continues to face demand pressure owing to rising  property prices, a subdued business environment, and regulatory developments like RERA and GST, said Anjan Ghosh, chief rating officer, ICRA. However, ICRA expects the sector to consolidate with larger developers to benefit in the long run, given the tighter compliance and transparency requirements. ICRA expects demand growth to improve to 4-5 per cent in FY19 and to 6-8 per cent in FY20 and FY21.