India Inc is unlikely to see any meaningful deleveraging — the process of reducing debt — in the current financial year, India Ratings & Research (Ind-Ra) has said in a report. Corporates with large refinancing requirements are likely to face severe challenges in refinancing their borrowings during the fiscal. This is because the balance sheets of mid-sized public sector banks are stretched due to high NPA (non-performing assets) levels, it said.
Ind-Ra said that a potential rise in global protectionism remains one of the most likely risks that could delay recovery in earnings and consequently credit profiles of corporates. “We do not expect a meaningful deleveraging of corporate borrowers in 2017-18. Broader macroeconomic indicators
suggest improving demand conditions.
“However, the recovery in the operating profitability levels of Indian corporates is likely to be moderate in the current fiscal,” the report said. “Although we expect a moderate recovery in profits in 2017-18, corporates with large refinancing requirements are likely to face severe challenges in refinancing their borrowings, as the balance sheets of mid-sized PSU banks are stretched due to high NPA levels.”
Ind-Ra said corporates operating in consumption and export oriented industries would exhibit a moderate improvement in their credit profiles, while those in investment-oriented sectors are unlikely to meaningfully improve in the near term.