Ind-Ra retains negative outlook for retail sector in FY'15

Posted By: Religare
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Ind-Ra retains negative outlook for retail sector in FY'15
India Ratings has retained its negative outlook for the retail sector the next fiscal as well with a stable bias, and ruled out revising it to positive near-term, said the media report.

The report also said a positive outlook for the sector is unlikely in the near future.Moderate single-digit revenue growth and operational efficiencies translating into stable margins comparable to levels seen thus far in FY14 will result in marginal improvement in credit profile from FY13 levels for most retailers, which is not strong enough to revise the negative outlook, the rating agency said in its report while retaining its negative outlook.

Given the low consumer confidence, deterioration in real wages and low private final consumption expenditure, the agency said it did not envisage a change in the outlook to positive even in the event of a modest revival in sales and margins.

However, a sustained reduction in consumer price inflation, coupled with a rise in real wages, is likely to restore the discretionary spending power of consumers, it added.

But a sudden spurt in government spending may have a temporary beneficial impact on private consumption, ultimately benefitting the sector, it added.

The agency expects the median pre-tax margins next fiscal to remain at levels observed thus far in FY'14.

Operational efficiencies translating into stable margins as seen in H1 of FY14 would marginally improve credit profiles of most retailers from FY'13 levels.

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