- Latest corporate earnings season muted as shocks aboundLiberal face of defence procurement policy lures slew of Indian companiesFinance Ministry paves way for unlisted Indian companies to list overseasIndian companies reducing debts through asset, equity sales to boost credit flow: S&P India
Indian companies are improving their debt position and boosting their credit profiles by sale of equity and assets, Standard & Poor's (S&P) Ratings Services said on Wednesday.
Companies may also look at using their free operating cash flows and divesting their stakes to reduce their debt, S&P said in a note.
"In our view, the companies' main reasons for improving their financial profiles are the weak economy and high interest rates in India, which have adversely affected cash flows and debt-servicing ability. Another reason is companies are refocusing on reducing debt after years of investing significantly on rapid growth," S&P's credit analyst Mehul Sukkawala said in the note.
The rating agency recently improved the ratings on companies like Tata Power and Bharti Airtel after both Indian companies started focusing on lowering debt, in addition to benefiting from favorable regulatory developments.
Tata Power announced a rights issue of Rs 2,000 crore and a stake sale in a coal mine amounting to about $500 million. Bharti Airtel also raised $1.25 billion through equity offering last year and we believe the company would continue to take measures such as sale of stakes in subsidiaries, such as Bharti Infratel, or non-core assets, such as its tower infrastructure business, the S&P note said.
Many companies in the infrastructure sector with very high leverage are also considering selling assets to improve their debt-servicing ability, financial flexibility and liquidity. S&P also expects companies to reduce debt through positive free operating cash flows.