New Delhi: A fall in the rupee's value against the dollar is less likely to impact credit ratings of Indian companies that are capable of servicing their debt even in severe downturn, global ratings agency Fitch said on Tuesday.
Fitch, however, said that some companies risk actions like outlook change or rating downgrade if the rupee depreciation is sustained.
In an analytical report of 302 companies on their credit profile, the ratings agency said that 274 of these companies are less likely to be impacted by rupee depreciation in terms of their credit rating.
However, other 28 companies may face an outlook change or rating downgrade if rupee depreciation is sustained.
Though, Fitch has not expected any of the issuers to default, it has warned of severe impact on non-investment grade or companies that won't be able to service their debt in bad conditions because of their limited financial flexibility.
The ratings agency said that "it does not expect the rupee to appreciate in the short term until global risk aversion subsides".
But, rupee may depreciate further if global risk aversion worsens or the domestic fiscal position deteriorates.
The study was focused on 14 sectors that would be most impacted either positively or negatively by rupee depreciation.
Export oriented companies are expected to derive lesser benefits from rupee depreciation than historically observed because of weak demand in global economy, aggressive price negotiations, hedging of foreign currency exposure and negative impact of foreign currency debt servicing, it said.
"These factors will cap the benefit to the credit profiles of companies in the pharmaceutical, technology, textile, and mining sectors," it said.
The impact will be marginal on companies that can pass on the cost increase like auto ancillary, oil and gas and metals.
But a slowdown in the end-user demand may force companies in auto and related sector to absorb some price increases.
Fitch, however, said that some companies risk actions like outlook change or rating downgrade if the rupee depreciation is sustained.
In an analytical report of 302 companies on their credit profile, the ratings agency said that 274 of these companies are less likely to be impacted by rupee depreciation in terms of their credit rating.
However, other 28 companies may face an outlook change or rating downgrade if rupee depreciation is sustained.
Though, Fitch has not expected any of the issuers to default, it has warned of severe impact on non-investment grade or companies that won't be able to service their debt in bad conditions because of their limited financial flexibility.
The ratings agency said that "it does not expect the rupee to appreciate in the short term until global risk aversion subsides".
But, rupee may depreciate further if global risk aversion worsens or the domestic fiscal position deteriorates.
The study was focused on 14 sectors that would be most impacted either positively or negatively by rupee depreciation.
Export oriented companies are expected to derive lesser benefits from rupee depreciation than historically observed because of weak demand in global economy, aggressive price negotiations, hedging of foreign currency exposure and negative impact of foreign currency debt servicing, it said.
"These factors will cap the benefit to the credit profiles of companies in the pharmaceutical, technology, textile, and mining sectors," it said.
The impact will be marginal on companies that can pass on the cost increase like auto ancillary, oil and gas and metals.
But a slowdown in the end-user demand may force companies in auto and related sector to absorb some price increases.
