Lockdowns in 2021 are much less stringent and extra localised, and enterprise behaviour has adjusted
Fitch Ratings expects the affect of India’s second Covid-19 wave on majority of its rated company universe to be manageable. Most firms’ credit score profiles are supported by their robust market positions, ample steadiness sheets and liquidity, diversified operations, and/or flexibility to regulate prices and key enterprise drivers till operations recuperate with the easing of restrictions.
There are, nonetheless, a number of entities with low ranking headroom or which may very well be topic to detrimental ranking motion if India’s sovereign ranking (BBB-minus/detrimental) 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 have been much less stringent and extra localised, and enterprise/societal behaviour has adjusted, supporting exercise.
Fitch expects the best demand affect inside our rated portfolio to be felt by Oravel Stays (OYO) and Future Retail as weak client sentiment impacts discretionary spending in fields like hospitality and non-food retail.
Technology and telecom firms are the least prone to see weaker demand. Falling demand for diesel and gasoline will hit throughput at refining firms however stronger refining and advertising 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 have an effect on demand for constructing supplies 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.”
