India's sovereign rating downgrade has created six "fallen angels", or companies in the non-financial sector whose ratings have dipped to just one notch away from being considered junk, global ratings agency Moody's Investors Service said on Tuesday. Companies that move from investment grade category to sub-investment grade are sometimes referred as "Fallen Angels".
All these six companies are state-run enterprises in the oil and gas sector, and have $1 billion of rated bonds coming up for repayment till 2021, the agency said. These six include Indian Oil Corporation, Hindustan Petroleum Corporation, Oil India, Petronet LNG, Bharat Petroleum Corporation and Oil and Natural Gas Corporation, the agency said, adding that the fundamental credit profiles of all of them are intact.
Further ratings action on the final ratings of these six state-run oil-and-gas companies will be driven by a downgrade of the sovereign rating and not a deterioration in their fundamental credit profiles, it said. Addition of the six Indian companies to the "fallen angels" took the list to an all-time high of 21 in Asia as of early June, it said, adding that the quantum of names in the list has doubled due to the Covid-19 pandemic and the Indian sovereign downgrade.
These 21 companies have over $12.3 billion of outstanding bonds maturing in 2021, of which $3.3 billion are rated and nearly a third of it is the addition from the six Indian players, it said. Since 2008, the fallen angels list has been dominated by Chinese companies, but lately, it is companies from India and South Korea taking the number up, it said.
Moody's had downgraded its rating on India by a notch recently on worries over growth and the fiscal strain. The rating is the last level in the category classified as "investment grade" at present. Many analysts are pegging GDP to contract 5 per cent in FY21 and also overshooting the fiscal deficit targets as the government spends more to limit the impact of the Covid-19 crisis amid a fall in tax revenues.