Sustained demand, easing cost pressure to aid Indian corporates' profit: Fitch
Jun 30, 2023
New Delhi [India], June 30 : Fitch Ratings believes India's resilient growth outlook and easing input costs in the financial year 2023-24 will counter the weakness in demand for its corporates - amid a somewhat global slowdown and rising interest rates.
"This will enable them (Indian corporates) to continue raising capex (capital expenditure) while maintaining adequate rating headroom," Fitch said in a report titled 'India Corporates: Sector Trends 1H23'.
It expects profit margins for Indian corporates to improve by around 220 basis points (or 2.2 percentage point) in 2023-24, helped by lower raw-material costs.
India, Fitch noted, is one of the fastest-growing countries globally, with GDP growth forecast at 6 per cent in 2023-24 (2022-23 at 7 per cent), despite fading post-pandemic pent-up demand.
"The resilient economic growth will drive cement and petroleum product demand, with high frequency data in 2023 so far trending above pre-pandemic levels. India's rising infrastructure spending will also boost steel demand," the report said.
However, it cautioned that the slowing demand in the US and the Eurozone will moderate sales growth for the IT service sector.
It said the production boost from easing supply chains and healthy domestic demand will mitigate export weakness for auto suppliers. Monthly passenger-vehicle and retail sales have risen year-on-year for over 14 months as of April 2023.
Travel and tourism industry conditions will continue improving in 2023-24. It also has a positive outlook for the Indian telecom operators.
"We have an improving outlook for Indian telcos, as continuous industry consolidation will support profitability and balance-sheet strength for the top-two telcos," it said, adding that operators' monthly average revenue per user will rise by 10-15 per cent in 2023.
Fitch expects India's bank credit growth to remain reasonably robust after 15.4 per cent growth in 2022-23.
"We believe that banks' increasing risk appetite amid efforts to boost returns will support the financial flexibility of Indian corporates," it added.
