Fitch Ratings expects the have an effect on of India’s 2nd Covid-19 wave on majority of its rated company universe to be manageable. Most corporations’ credit score profiles are supported by means of their robust marketplace positions, good enough stability sheets and liquidity, varied operations, and/or flexibility to regulate prices and key industry drivers till operations get better with the easing of restrictions.
There are, alternatively, a number of entities with low ranking headroom or which might be matter to unfavorable ranking motion if India’s sovereign ranking (BBB-minus/unfavorable) or nation ceiling (BBB-minus) are downgraded.
“We believe the second wave will have a less severe impact on corporates than in 2020 despite a higher infection rate. Weaker domestic demand is a key channel of risk transmission for businesses,” stated Fitch.
However, lockdowns in 2021 were much less stringent and extra localised, and industry/societal behaviour has adjusted, supporting task.
Fitch expects the best call for have an effect on inside of our rated portfolio to be felt by means of Oravel Stays (OYO) and Future Retail as vulnerable shopper sentiment impacts discretionary spending in fields like hospitality and non-food retail.
Technology and telecom corporations are the least prone to see weaker call for. Falling call for for diesel and fuel will hit throughput at refining corporations however more potent refining and advertising and marketing margins will support their profitability, stated Fitch.
“We expect lower curtailment risk for domestic power producers than in 2020 but further delays in payments from state-owned power distribution companies (discoms) can weaken cash flows and liquidity.”
Execution delays in building tasks can impact call for for construction fabrics and metal. “But we expect activity to pick up once the current wave subsides and high prices to support margins. Improving global demand will support sectors like steel, chemicals and pharmaceuticals.”