Fitch Rankings expects the impression of India’s second Covid-19 wave on majority of its rated company universe to be manageable. Most firms’ credit score profiles are supported by their sturdy market positions, satisfactory steadiness sheets and liquidity, diversified operations, and/or flexibility to regulate prices and key enterprise drivers till operations get better with the easing of restrictions.
There are, nonetheless, a number of entities with low ranking headroom or which might be topic to detrimental ranking motion if India’s sovereign ranking (BBB-minus/detrimental) or nation ceiling (BBB-minus) are downgraded.
“We imagine the second wave may have a much less extreme impression on corporates than in 2020 regardless of the next an infection price. Weaker home demand is a key channel of threat transmission for companies,” mentioned Fitch.
Nevertheless, lockdowns in 2021 have been much less stringent and extra localised, and enterprise/societal behaviour has adjusted, supporting exercise.
Fitch expects the best demand impression inside our rated portfolio to be felt by Oravel Stays (OYO) and Future Retail as weak client sentiment impacts discretionary spending in fields like hospitality and non-food retail.
Know-how and telecom firms are the least more likely to see weaker demand. Falling demand for diesel and gasoline will hit throughput at refining firms however stronger refining and advertising and marketing margins will help their profitability, mentioned Fitch.
“We count on decrease curtailment threat for home energy producers than in 2020 however additional delays in funds from state-owned energy distribution firms (discoms) can weaken money flows and liquidity.”
Execution delays in development initiatives can have an effect on demand for constructing supplies and metal. “However we count on exercise to choose up as soon as the present wave subsides and excessive costs to assist margins. Bettering international demand will assist sectors like metal, chemical substances and prescribed drugs.”