Moody’s Downgrades Outlook On Some Large Indian Companies

On Friday, Moody's Investors Service revised its outlook on six Indian financial institutions from "stable" to "negative." These include HDFC Bank, State Bank of India (SBI), Exim Bank, Hero FinCorp, HUDCO and IRFC (Indian Railway Finance Corporation).

HDFC Bank: Quotes, News

BSE 781.7016.55 (-2.12%)

NSE 782.3017.4 (-2.22%)

State Bank of India: Quotes, News

BSE 1060.5529.75 (-2.81%)

NSE 1060.6029.8 (-2.81%)

The rating agency also downgraded outlook of eight other non-financial corporates to "negative" from "stable", namely Infosys, Tata Consultancy Services (TCS), BPCL, HPCL, ONGC, Indian Oil, Oil India and Petronet LNG.

Outlook on companies in the business of information technology (IT), infrastructure and oil & gas, were downgraded with 21 being the total number of Indian companies that saw a cut in outlook on Friday.

However, in the banking sector, outlook and rating on Bank of India, Canara Bank, Oriental Bank of Commerce, Syndicate Bank and Union Bank of India were kept unchanged.

The downgrades made in the various sectors were mainly on account of their sovereign links.

Earlier, Moody's downgraded India's outlook from 'stable' to 'negative' on mounting concerns over an economic slowdown in the country. It said that India's ongoing economic slowdown may become "entrenched" and "long-lasting," despite government measures.

It said that the measures taken by the Indian government "to help reduce the depth and duration of India's slowdown in economic growth" have failed as "prolonged financial stress among rural households, weak job creation, and a credit crunch among non-bank financial institutions have increased the probability of a more entrenched slowdown."

The downgrade of Exim Bank, Hudco, IRFC and SBI were on account of their close links with the government, said Moody's Investor Services.

Reasons for HDFC Bank's downgrade were similar. The agency said that the private lender's business was strongly linked to the country's sovereign credit profile, "including by way of large direct exposure to government debt and exposure to common underlying operating conditions," due to which "the Baseline Credit Assessment (BCA) of a bank is capped at the sovereign rating of the country that it operates in".

NTPC, NHPC, NHAI, GAIL, Power Grid, Adani Green and Adani Transmission saw an outlook cut for being sovereign-linked infrastructure companies.

"Moody's does not have any particular governance concern for all the issuers impacted by today's rating action. Moody's does not apply any corporate behavior adjustment to the banks and views their risk management framework as consistent and commensurate with their risk appetite," the agency added.

"Ratings for Infosys and TCS are constrained to no more than two notches above the sovereign rating. Therefore a sovereign rating downgrade will also result in downgrade of the A3 ratings of Infosys and TCS," said Kaustubh Chaubal, a Moody's Vice President.