Others that have seen a downgrade in outlook are Exim Bank, Hero FinCorp, Hudco and Indian Railway Finance Corporation (IRFC).
The rating agency has kept ratings and outlook unchanged for Bank of India, Canara Bank, Oriental Bank of Commerce, Syndicate Bank and Union Bank of India.
The agency has also downgraded the outlook for eight non-financial corporates to negative from stable. They are BPCL, HPCL, Indian Oil, ONGC, Oil India, Petronet LNG, Infosys and Tata Consultancy Services.
In case of Exim Bank, Hudco, IRFC and SBI, Moody’s Investors Service said close links between these four companies and the government of India is the key reason for their downgrade. Moody’s has changed the outlook for these companies to negative from stable, after doing the same for the sovereign rating. Moody’s believes that these companies will receive government support in times of need.
For HDFC Bank, it reasoned that due to the “strong linkages between a bank’s business and the sovereign credit profile, including by way of large direct exposure to government debt and exposure to common underlying operating conditions, the Baseline Credit Assessment (BCA) of a bank is capped at the sovereign rating of the country that it operates in”.
“Moody’s does not have any particular governance concern for all the issuers impacted by today’s rating action. Moody’s does not apply any corporate behavior adjustment to the banks and views their risk management framework as consistent and commensurate with their risk appetite,” the New York-based rating agency said in a release.
Ratings of the above-mentioned financial institutions are unlikely to be changed in the next 12-18 months, Moody’s said.
“Ratings for Infosys and TCS are constrained to no more than two notches above the sovereign rating. Therefore a sovereign rating downgrade will also result in downgrade of the A3 ratings of Infosys and TCS,” says Kaustubh Chaubal, a Moody’s Vice President — Senior Credit Officer.