After India, S&P cuts outlook on 4 govt-related cos to negative

Standard & Poor’s Ratings Services today revised its outlook on four Indian government-related entities (GREs) to negative from stable. The companies which face the downgrade are Power Finance Corp, India Infrastructure Finance, Indian Railway Finance Corp andExport-Import Bank of India.

S&P also affirmed the rating BBB- for long term issues for these companies.

S&P had revised India’s long-term sovereign credit rating outlook to negative from stable. However, the long-term sovereign rating has been affirmed at ‘BBB-’. The rating for these companies, the credit rating agency says, reflect the change in outlook on India.

[caption id=“attachment_288255” align=“alignleft” width=“380” caption=“S&P also feels that the role of PFC in the power sector and in the entire economy is crucial. Reuters”]  [/caption]

S&P said in a press release, “We have equalized the ratings and outlooks on India EXIM, IIFCL, and IRFC with the sovereign rating and outlook. This reflects the entities’ integral linkages with, and their critical roles to, the government of India. We believe there is an ‘almost certain’ likelihood of extraordinary government support to these GREs.”

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S&P also feels that the role of PFC in the power sector and in the entire economy is crucial. Therefore, there is an “extremely high” likelihood of extraordinary government support to the company. “Such level of support, combined with PFC’s stand-alone credit profile, results in a rating that is at the same level as the rating on India,” said S&P. Following the downgrade, PFC tanked 6 percent on the bourses.