Ratings agency Fitch has said it is less optimistic than the markets in its growth projections about top Indian companies.
According to Fitch Ratings and India Ratings and Research which is part of the Fitch Group, they are less optimistic in their projections for the 27 Indian corporates they publicly rate compared with Bloomberg consensus estimates (BEst).
"BEst expect 87 of India's top-100 listed non-financial corporates by market capitalisation to be in the credit-positive change zones of cash flow growth exceeding net debt growth over the financial years ending-March 2016 (FY16) to FY18," the ratings agency said in its report made available in New Delhi on Thursday.
"While 13 are expected to be in the credit-negative change zones of net debt growth exceeding cash flow growth. This represents a more optimistic position compared to FY14-FY16, where 64 corporates were in credit-positive change zones."
On its part, Fitch projects that 17 out of the 27 'Fitch-rated' corporates in the top-100 portfolio to be in credit-positive change zones, where leverage is forecast to fall, and 10 companies in the credit-negative change zones, where leverage is forecast to rise.
"For this same set of corporates, BEst forecast a higher 20 in credit-positive change zones and only seven in credit-negative change zones," the report elaborated.
"Four of the 27 Fitch-rated companies are positioned in opposite credit change zones when comparing Fitch and BEst estimates."
Fitch has predicted Wockhardt, NHPC, and Reliance Industries to be in credit-negative change zones, whereas BEst forecasts these companies in credit-positive change zones.
Conversely, Fitch forecasts Bharti Airtel in the credit-positive change zone, whereas BEst forecasts this company in the credit-negative change zone.
"We believe market expectations of improving corporate credit profiles is driven more by projected higher EBITDA (earnings before interest, tax, depreciation and amortisation) generation than lower debt and capex (capital expenditure)," the report explained.
"BEst forecasts aggregate net debt/EBITDA leverage for the top-100 portfolio to fall to 1.3x by FY18, from 1.7x in FY16. Leverage is forecast to fall most for corporates in the construction and engineering sector, followed by metals and mining, then the retail, leisure and consumer products sector."