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Indian companies' show mixed but getting better, says S&P's team

Indian industrial companies are facing greater risk today than ever due to various factors such as economic slowdown, interest rate increases, hike in indirect taxes and lack of infrastructure facilities, according to international rating agency Standard and Poor's Director (Corporate Ratings) Chris Legge.

At a meeting with corporate and financial institutions in Bombay organised by the Credit Rating Information Services of India Limited, Legge said that the performance of Indian companies was so far mixed, but is getting stronger even in difficult operating environment.

To counter the emerging trend, the response from Indian corporate majors was positive as they went for rationalisation of their assets, expansion and acquisition and radical cost improvements.

The regional financial climate such as exchange rate depreciation, commodity demand, commodity price movements also affected the Indian companies, he said.

On divestment of Indian public sector, S&P's Associate Director Craig Parker said that the state-owned enterprises must be analysed on a stand-alone basis and no guarantee or sovereign support should be given.

Citing the case study of Baoshan Iron and Steel Corporation of China, Parker said that the government must provide a favourable policy and financial support to the enterprises with managerial autonomy and market-based decision-making. Relatively new companies are more able to adjust to the market-driven economy, he added.

Talking on restructuring of Indian corporates and financial sector entities, CRISIL Deputy General Manager Roopa Kudva said that the economic slowdown is leading to exit of many players both in corporate and financial fields. While low share prices facilitated acquisition and takeover by big players, there is also willingness of financial institutions to sell their holdings.

The Indian companies are also in the process of business re-engineering through modernisation and use of latest technology and engaged in swapping of high-cost debt with low-cost debt, sometimes increasing in tenure of borrowings.

Citing some Indian industrial segments like cement, automobiles, pharmaceuticals and steel, Kudva said that the challenges being faced by the Indian companies were increase in financial risk profile and various impediments in restructuring of industry like legal systems, exit policy and funding availability for merger and acquisitions. Further, the asset quality of Indian corporates are under pressures due to difficult market conditions.

UNI