Key Points
India projected fastest growing economy in Asia-Pacific
Renewable capacity expansion planned to 500 GW by 2032
Sectors like steel and chemicals show strong growth potential
Stressing that India's low US exposure reduces trade tariff risks, the report mentioned that domestic focus and strong fundamentals bolster Indian companies' defences.
"Most of our rated Indian firms can withstand temporary earnings slowdowns. Improvements in operating and financial strength over the last few years provide more cushion to help absorb such pressures. Firms in the country also benefit from a growing economy, supported by strong infrastructure and consumer spending," the report emphasised.
It further stated that Indian companies are protected by robust growth and strengthened credit quality and most will fund onshore given better access to deepening liquidity onshore.
Sectors with a high dependence on US markets are mainly IT services, chemicals, and autos. Services are not subject to tariffs, but in the auto sector, some firms, such as Tata Motors Ltd., via Jaguar Land Rover Automotive PLC (JLR), have relatively high exposure to the US.
According to the report, India plans to expand renewable capacity to an ambitious 500 gigawatts (GW) by 2032 from about 200GW currently.
"There is also significant investment in the transmission sector. Power Grid Corp. of India Ltd. could double its capital expenditure to more than Indian rupee 300 billion per annum for the next few years," the report noted.
The report expects the median revenue and EBITDA growth of its rated firms to reach nearly 8 per cent in fiscal 2025. This would mark the fifth straight year of such expansion. Steel, chemicals, and airport sectors will likely report above-average EBITDA growth.
In our base case, steel producers will benefit from a modest decline in input prices and a substantial increase in volumes following recent capacity additions, although product prices will likely stay rangebound.
This is assuming no impact on steel prices from trade diversion under the US tariffs.
The chemicals sector will continue to recover following the downturn in 2024, said the report.
"We expect Indian firms to predominantly fund onshore this year given the lower cost of domestic markets. Offshore channels, including dollar bonds, remain an option, but companies will likely use this selectively," it said, adding that years of credit improvements and healthy economic growth also reinforce rated firms' resilience.
