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S&P lowers rating outlook on Reliance, L&T, GIC, IOC, 8 others

Sumeet Chatterjee in New Delhi

Standard & Poor's on Wednesday lowered its rating outlook on India's largest business conglomerate Reliance Industries and 11 other companies, a day after cutting the country's credit rating by a notch.

The other companies include Larsen and Toubro and Tata Power and the state-run Indian Oil Corp, National Thermal Power Corp, Indian Railway Finance, and Power Finance Corp.

S&P also downgraded the public information ratings on state-owned General Insurance Corp, National Insurance Corp, New India Assurance, Oriental Insurance, and United India Insurance to triple-'B'-minus from triple-'B'.

The credit rating major lowered India's local currency rating on Tuesday, citing "unchecked budget deficits and rising domestic indebtedness.

"India's general government budget deficit, which includes both the central and state governments, is likely to exceed 10 per cent of gross domestic product in the current year," it said.

The downward outlook revision, which comes close on the heels of Moody's lowering its rating of India, reflects rising concern that public finances might worsen further in the years to come as public sector reform process loses its steam in the face of opposition from various quarters.

Said Sujata Srikumar, managing director of the New Delhi-based credit rating firm Crisil: "After the lowering of India's sovereign rating to 'negative' from 'stable', a downward revision in the outlook of blue-chip companies was also expected.

"The downward revision won't have any immediate adverse impact on these companies but in the long term this may increase the cost of funds in an already slowing economy," she said.

The Indian economy grew 3.8 percent in the first quarter (April-June) over the same period in 2000-01, the slowest in almost three years. India has set a 6.5 percent growth target for the year ending March 31, 2002, though economists say the country may only be able to achieve 5.5 per cent.

Indo-Asian News Service

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