Global credit ratings agency Moody's Investors Services has downgraded the ratings of major Indian companies like Oil and Natural Gas Corporation Ltd. (ONGC), Hindustan Petroleum Corporation Ltd. (HPCL), Oil India Limited (OIL), Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Limited (BPCL), Petronet LNG Limited (PLL), Tata Consultancy Services Limited (TCS), Infosys Limited (Infosys) to ‘negative’ on Tuesday after it downgraded India's sovereign rating to Baa3 negative from Baa2 on June 1.
In addition, Moody's has affirmed the long-term issuer ratings of Reliance Industries Limited (RIL) to ‘negative’ from ‘stable’ while the outlooks for UPL Corporation Limited (UPL Corp) and Genpact Limited (Genpact) remains stable.
Under Moody's joint default analysis approach for government-related issuers (GRIs) like ONGC, OIL, IOCL and and BPCL, government support is one of the key considerations. The ratings of these four GRIs are very sensitive to a decline in the rating of their government owner given their close links with the Government of India.
"As a result, each GRI has been downgraded by one notch, consistent with the downgrade of the sovereign rating," said a Moody's statement.
For downgrade of HPCL and PLL, Moody's statement said, "HPCL's rating incorporates Moody's expectation of support from the Government of India through ONGC, and has accordingly also been downgraded following the rating action on the sovereign and ONGC. The downgrade of PLL with a negative outlook follows the rating actions on its key counterparts, including IOCL and BPCL."
According to Moody's, the ratings of TCS and Infosys are constrained to no more than two notches above the sovereign rating. The sovereign downgrade to Baa3 negative therefore results in the rating downgrades of TCS and Infosys to Baa1 negative from A3 negative.
"The affirmation of RIL's Baa2 issuer rating reflects Moody's view that its credit metrics remain appropriately positioned for its rating. The change in RIL's outlook to negative from stable is in line with the downgrade of the Indian sovereign rating with a negative outlook and reiterates Moody's view that it cannot be rated more than one notch above the Indian sovereign," said a Moody's statement.
The affirmation of the Baa3 issuer ratings with a stable outlook for UPL and Genpact reflects Moody's view that these entities can be rated one notch above the Indian sovereign.
Besides, Moody's Investors Service has also downgraded seven leading Indian infrastructure issuers by one notch including, National Thermal Power Limited (NTPC), NHPC Limited (NHPC), National Highways Authority of India (NHAI), Power Grid Corporation of India Limited (Power Grid), Gail (India) Limited (GAIL), Adani Green Energy and Adani Transmission.
