S&P says focus on lowering debt credit positive for Indian companies
Companies are boosting credit profiles by selling assets or using free operating cash flows to cut debt, says S&P
Mumbai: Global rating agency Standard and Poor’s (S&P) on Wednesday said more Indian companies are boosting their credit profiles through measures such as sale of equity and assets or using their free operating cash flows to reduce debt.
The measures will improve the credit profiles of these companies depending upon the size of the measures taken, S&P said in a press release.
“Besides raising equity and selling non-core assets, Indian companies are also divesting stakes in businesses," said Mehul Sukkawala, credit analyst at S&P.
Recently, the agency revised the outlook on ‘B+’ rating of Tata Power Co. Ltd to positive and raised the rating on Bharti Airtel Ltd to ‘BBB-’ after both companies started focusing on lowering debt, in addition to benefiting from favourable regulatory developments, the agency said.
In addition, many companies in the infrastructure sector with very high leverage are considering selling assets or stakes in subsidiaries to improve their debt-servicing ability, financial flexibility and liquidity, S&P said.
S&P cited the sale of two road projects by GMR Infrastructure Ltd in 2014 and its plans to sell its 40% stake in the Istanbul Sabiha Gokcen International Airport.
“We believe this would enable the company, and others like it, to withstand the current weak economic environment and position well for future opportunities," it said.
S&P also expects companies to reduce debt through positive free operating cash flows as many Indian companies have significantly reduced capital expenditure and expansion plans in the current economic environment, the release said.
“This is especially the case for sectors that typically use high capital expenditures, such as power, metals and mining, and infrastructure," the agency said.
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