Protracted growth path for discretionary, industrial buckets: Ind-Ra

Mumbai (Maharashtra) [India], Jan 5 : India Ratings and Research (Ind-Ra) on Tuesday charted a strong growth recovery path for essentials while expecting a long-drawn recovery for industrial and non-discretionary buckets.
It thus maintained a stable outlook for sectors falling in the essentials bucket with a stable-to-negative outlook for the sectors belonging to industrial and non-discretionary buckets for 2H FY21.
Ind-Ra said most supply-side shocks have softened while the demand for discretionary may take longer than other three buckets -- industrial, non-discretionary and essential.
The number of negative rating actions has outpaced that of positive rating actions in the six months ended September 2020.
Ind-Ra has 80 per cent of its large corporate ratings on a stable outlook or positive outlook with 16 per cent of the ratings on either a rating watch negative or a negative outlook and 4 per cent ratings on rating watch evolving.
The agency said a majority of rating actions have been seen in the discretionary bucket followed by industrial.
The number negative rating actions in six months ended September 2020 has been consistent with Ind-Ra's recovery path framework and reflect significant response of rated issuers to manage liquidity (reduce capex, cut dividends, manage working capital) and cost structures during the pandemic.
Margin improvements reflect the possibility of a protracted pick-up in growth which may continue to weigh on ratings in the short to medium term.
Regulatory forbearances in the form of emergency government guaranteed lines of credit have aided system liquidity while loan restructuring has provided the necessary short-term relief.
However, the long-term ability to service higher debts or restructured debt will be dependent on a demand pick-up, said Ind-Ra.
It said discretionary sectors will take until FY22 or beyond to recover to pre-Covid-19 levels while essentials will sustain and grow in sync with demand.