Indian rupee, higher rates to impact credit risk of companies: Moody's

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Moody's has said that as domestic interest rates are rising most companies will face higher borrowing costs after refinancing of existing debt. Moody's has said that as domestic interest rates are rising most companies will face higher borrowing costs after refinancing of existing debt.
SummaryCompanies such as Indian Oil, Tata Steel will remain highly leveraged over the next 12 months.

report said.

State-run companies ONGC, Bharat Petroleum and IndianOil, and private sector energy conglomerate Reliance Industries, together account for 60 per cent of the total rated corporate debt maturing through next March, it said.

These four companies have over Rs 90,000 crore (USD13.4 billion) in debt denominated in foreign currencies coming due in this period, it added.

However, the agency says it believes "they will continue to have access to domestic and international funding, given their large size, long history, and/or status as state-owned enterprises."

Despite the fall in rupee, the Moody's said its rated non-financial companies should be able to meet their USD 32.8 billion in debt coming due through March 2014, more than half of which is denominated in foreign currency, as they will continue to have access to offshore and onshore funding sources.

(Reuters)

Some Indian companies could see the quality of their debt decline as higher global borrowing costs and a sharply weaker rupee take their toll, Moody's Investors Service said on Thursday.

Companies such as Indian Oil Corp, Tata Steel and Tata Power Ltd will remain highly leveraged over the next 12 months because of weak industry dynamics and resulting constraints on cash flows, it said.

"We believe they will be able to refinance their maturing debt, but possibly at higher credit spreads than on existing debt," the agency said.

But while the rupee has slumped as much as 20 per cent this year, it said rated Indian non-financial companies should be able to meet their $32.8 billion in debt coming due through March 2014, more than half of which is denominated in foreign currency, as they will continue to have access to offshore and onshore funding sources.

State-run companies Oil & Natural Gas Corp (ONGC), Bharat Petroleum Corporation Ltd and Indian Oil Corp, and private sector energy conglomerate Reliance Industries (RIL), together account for 60 per cent of the total rated corporate debt maturing through next March, it said.

The agency said that as domestic interest rates are also rising most companies will face higher borrowing costs after refinancing of existing debt.

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