State Bank of India, ICICI Bank,
HDFC, NTPC, SAIL, TCS, Infosys, Wipro and IIFCL are among the companies whose
rating outlook has been slashed to negative from stable by S&P
New Delhi: Standard & Poor’s on Wednesday downgraded the rating outlook
of as many as 21 entities spanning across top banks, software exporters and
public sector undertakings following the agency’s revision of country’s
sovereign outlook, reports PTI.
State Bank of India, ICICI Bank, HDFC, NTPC, SAIL, TCS, Infosys, Wipro and
IIFCL are among the companies whose rating outlook has been slashed to negative
from stable by S&P.
The global rating agency’s move reflects the “outlook on the sovereign credit
rating on India”, which too has been lowered to negative, citing slow fiscal
progress and deteriorating economic indicators.
S&P has also revised downwards the rating outlook of Export-Import Bank
of India, Indian Railway Finance Corp, Power Finance Corp, NHPC, Axis Bank, Bank
of India, IDBI Bank, Indian Overseas Bank, Indian Bank, Syndicate Bank, Union
Bank of India and IDFC.
“We have equalised the ratings and outlooks on India EXIM, IIFCL, and IRFC
with the sovereign rating and outlook.
This reflects the entities’ integral linkages with, and their critical roles
to, the Government of India,” S&P said.
According to the agency, outlook rating of NTPC, NHPC and SAIL are highly
influenced by the sovereign rating given the entities’ sensitivity to government
intervention in the event of financial distress.
S&P has also affirmed the ‘BBB-’ long-term issuer credit ratings of all
the 21 entities.
Regarding banks, the agency cautioned that their rating could also be lowered
if similar steps are taken for sovereign rating.
Experts also said that S&P’s move would not significantly impact the cost
of resource mobilisation of the Indian banks since they raise bulk of the money
from the domestic sources.
Lowering the rating outlook of the top three software exporters—TCS, Infosys
and Wipro—the agency said it “reflect our ‘BBB+’ transfer and convertibility
(T&C) assessment of India.
“We could lower the ratings on these companies if we revise downward our
T&C assessment. We could lower our T&C assessment if we
downgrade sovereign credit rating”.
S&P has also warned of downgrading India’s rating in two years if there
is no improvement in the fiscal situation and the political climate continues to
worsen.
“The rating outlook of the government-owned institutions cannot be higher
than the sovereign rating. So accordingly, our rating outlook has been revised,”
IIFCL chairman and managing director SK Goel said.
IIFCL gets funding from multilateral institutions. So, rating revision has no
impact on the company, he said.