India companies to face better conditions in 2021: Moody's

04 Dec '20

2 min read

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The earnings of most Indian companies will grow next year as economic activity gathers pace post-lockdown and demand starts to recover following a sharp slump, supporting deleveraging, according to rating agency Moody’s Investor Service, which recently said financially strong companies will have decent access to funding, while speculative-grade issuers will face challenges.

Specifically, around 39 per cent of the total $16 billion of debt maturing through 2022 pertains to financially weaker, speculative-grade issuers, it said.

This underpins Moody's Investors Service's “stable” outlook for Indian corporates in 2021.

Broad-based demand revival and a low base in 2020 will support strong gross domestic product (GDP) growth of 10.8 per cent in India in fiscal 2022 ending March 2022. It would follow a decline of around 10.6 per cent in fiscal 2021—the country's first contraction in four decades, said Sweta Patodia, a Moody's analyst.

"These improving business conditions will increase rated issuers' earnings, which we expect to return to pre-pandemic levels by the end of fiscal 2022. A combination of higher earnings and reduced capital spending will support deleveraging over the next 12-18 months," Patodia added.

However, the overall recovery will remain fragile as new infections continue to grow, although at a slower rate.

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