Six PSU’s potential ‘fallen angels’ after India’s sovereign rating downgrade; COVID-19 took toll: Moody’s

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Updated: Jun 10, 2020 2:56 PM

After India’s sovereign credit rating fell to lowest investment grade ‘Baa3’ early in June, six Indian public-sector undertakings (PSUs) have also taken a hit with them now becoming potential “fallen angels”.

Moody's downgrades India's rating to Baa3; outlook remains ‘Negative’Image: Reuters

After India’s sovereign credit rating fell to lowest investment grade ‘Baa3’ early in June, six Indian public-sector undertakings (PSUs) have also taken a hit with them now becoming potential “fallen angels”. These six companies in the non-financial sector viz — Indian Oil Corporation, Hindustan Petroleum Corporation, Oil India, Petronet LNG, Bharat Petroleum Corporation and Oil and Natural Gas Corporation — are now just one step away from being considered junk, global ratings agency Moody’s Investors Service said on Tuesday. “Fallen Angels” are those companies which were earlier in the investment grade category and have slipped to sub-investment grade. 

As the coronavirus pandemic has afflicted markets and economy around the world, the Asian list of potential “fallen angels” has reached an all time high of 21 in early June owing to the addition of six Indian PSUs, the agency said. The quantum of names in the list has doubled due to the COVID-19 pandemic. The 21 Asian companies, which now risk becoming fallen angels, have over $12.3 billion of outstanding bonds maturing in 2021. Of this $12.3 billion, about one-fourth at $3.3 billion are rated. The six Indian companies which have been added to the potential “fallen angels” category are state-run enterprises in the oil and gas sector. They have $1 billion of rated bonds coming up for repayment till 2021, the agency said.

India leaves China behind, but, that is no good news

Since 2008, Chinese companies have dominated the “fallen angels” list which has lately become a domain of Indian and South Korean companies.

Moody’s downgraded its rating on India by a notch recently after worries over growth and the fiscal strain abound. India’s current rating is the last level in the category classified as “investment grade”. “The country’s policymaking institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth, significant further deterioration in the general government fiscal position and stress in the financial sector,” Moody’s said in a statement after downgrading India rating. However, the effect of the cut is likely to be short term on investment flows. 

  • First published on www.financialexpress.com on 9 June 2020.

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