“According to rating agency Moody’s, the earnings of most Indian companies will increase in 2021 as demand begins to recover following a sharp recession, encouraging deleveraging.
Businesses that are financially strong will retain good access to financing, while issuers of risky grades may face challenges.
Situations for Indian companies will improve in 2021, as post-lockdown economic activity gathers pace and earnings rise on the back of robust demand recovery across sectors. This underpins the “”stable”” viewpoint of Moody’s Investors Service for Indian companies in 2021.
Significant GDP growth of 10.8% in India in fiscal 2022 ending March 2022 will be driven by broad-based demand recovery and a low base in 2020. Ms. Sweta Patodia, a Moody’s analyst, said, “Improving market conditions will increase the income of rated issuers, which we expect to return to pre-pandemic levels by the end of fiscal 2022. Over the next 12-18 months, a combination of higher earnings and decreased capital spending would encourage deleveraging.”
The low interest rate environment and widespread availability of credit meanwhile will allow companies with strong balance sheets to refinance and expand. Liquidity would however be tight for financially poorer issuers, exacerbating their operational difficulties.”