“Capital expenditure by rated Indian companies is expected to remain elevated at around $45-50 billion annually over the next one to two years. With an annual capex budget of around $15 billion spread across its various business segments, Reliance Industries alone will account for around 30 per cent of the portfolio’s capex,” Moody’s Ratings said.
The oil and gas sector and Reliance Industries will collectively account for over 60 per cent of the qualifying Indian portfolio spending over the next few years.
Moody’s said the seven rated oil and gas companies in India will also account for about 30 percent of the capital expenditure of the rated Indian companies.
These companies will spend around $15 billion annually to expand existing capacity and make investments in green energy to reduce the risk of the carbon transition.
For example, Oil and Natural Gas Corporation Ltd. (Baa3 stable) and Indian oil Moody’s will invest $6 billion and $4 billion, respectively, in each of the next two years on reserve additions, downstream integration and energy transition, it added. It also said strong earnings will continue to maintain Moody’s leverage. Indian Corporations Credit ratings for Indian and Indonesian companies will remain strong, according to Moody’s.
India and Indonesia are the two largest emerging market economies in Asia, excluding China. These two G20 countries have the largest number of rated companies and the largest stock of rated debt among emerging economies in the region outside of China.
India’s GDP is projected to grow by more than 6 percent over the next two years, Moody’s said, adding that domestic demand will be the main driving force behind India’s growth.
India’s large share of domestic consumption has and will continue to shield rated companies from external shocks. In addition, as urbanization accelerates across the country, sustained government spending on infrastructure will boost business activities in key industrial sectors, Moody’s said.
India’s economy is well diversified across services and manufacturing. India’s large domestic market helps protect the country from fluctuations in external demand, Moody’s said, adding that it expects the leverage of rated companies in India to remain low.
Moody’s Ratings expects earnings of rated Indian companies to grow by 5 percent over the next two years. Companies will benefit from broad-based growth across several sectors, including metals, mining and steel, telecoms and automotive companies.
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