Genpact, UPL Corporation Won't Be Impacted By India Downgrade: Moody's

Genpact (Baa3 stable) and UPL Corporation (Baa3 stable) will not be impacted by the potential downgrade in India’s rating to “Ba1” and their present rating may be retained, according to Moody’s.

The rating agency said in a statement that five Indian firms meet the criteria for being rated ‘above the sovereign’. They are financially strong, with significant global earnings. The others are Tata Consultancy Services (Baa1 negative), Infosys (Baa1 negative), and Reliance Industries (Baa2 negative), all rated above the sovereign.

TCS, Infosys, and RIL will retain their investment-grade status even at lower ratings. However, government-owned or government-linked firms will lose their investment-grade ratings.

UPL’s globally diversified customer and manufacturing base, and limited reliance on domestic funding sources, both allow it to be rated one notch above the sovereign.

The outlook for the company is stable, despite the sovereign’s negative outlook. UPL will maintain its ratings even if the sovereign is downgraded to Ba1, all other things remaining same.

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IT majors TCS and Infosys are rated two notches above the sovereign. This could be attributed to the scale of their global operations and minimal reliance on domestic funding.

Their credit profiles and geographical diversification are substantially stronger than Genpact’s. Nevertheless, Genpact is likely to maintain its current rating, should the sovereign get downgraded to Ba1.

Even if the Indian sovereign faces potential credit stress and defaults, Genpact is unlikely to face significant operational stress given that 80 per cent of its revenue comes from clients in North America and Europe.

As regards RIL, Moody’s said its large-scale and diversified business, coupled with its balanced funding mix, allows it to be rated one notch above the sovereign.

However, RIL’s digital services and retail businesses have increased their links to India’s economy. Therefore, it does not meet the criteria to be rated two notches above the sovereign even though its credit metrics warrant such an assessment.