Mumbai: Leverage ratios for non financial Indian companies will improve slightly in the fiscal year ended March 2019 mainly because of growth in revenue, though telecommunications, metals and mining sectors will remain burdened by debt, Moodys Investors Service said in a note on Tuesday.
Aggregate debt to EBITDA (earnings before interest tax depreciation and amortisation) will decline slightly to 2.4 times in fiscal 2019 from 2.5 times a year earlier helped by a growth in earnings.
"The revenue and EBITDA of non-financial corporates that we rate in India should grow 10% and 8%, respectively, for fiscal 2019 (in the fiscal year ending March 2019) from a high base," said Laura Acres, managing director at Moody's.
However, leverage for the telecommunications sector's will remain elevated on relentless competition, which will in turn hurt profitability even as cash flow generation is constrained because of continued capital spending.
For companies in the metals and mining sectors leverage will increase as these entities borrow more to fund capital spending and acquisitions, the US based agency said.
Acquisitions and capital spending financed by debt will cause the debt levels of Moody's-rated companies to rise by 5% in fiscal 2019.
“As for revenue and EBITDA growth, several factors can limit these levels. In particular, high commodity prices will benefit the metals and mining, and oil and gas sectors, but are negative for end-user industries — such as the auto, chemicals and real-estate sectors — unless they can pass the higher costs to their customers,” Moodys said.
Tightening regulations and trade tariffs globally will strain export-oriented sectors such as IT services and auto, but the weakening rupee will somewhat cushion this impact. Increasing compliance with environmental, social and governance regulation could also keep business costs high.