India's Economic Recovery To Aid Finance Companies, S&P Says

S&P Global Ratings said the credit quality of Indian finance companies will continue to improve owing to the country's strong macroeconomic trends.

However, the improvement in credit profiles of finance companies will be far from uniform, the rating agency said in a statement.

“Stronger companies will likely gain market share, given their better funding access,” S&P Credit Analyst Deepali Seth Chhabria said. “Meanwhile, weaker players could resort to originate-and-distribute business models to tide over the liquidity stress."

Rising interest rates are likely to push up borrowing cost for Indian finance companies, S&P said, adding that companies with strong governance and parentage are likely to fare better than others.

The rating agency expects bank borrowings to dominate incremental funding in 2023. The outlook on most rated finance companies are stable, reflecting their strong earnings, capitalization, and improving asset quality, it said.

S&P said higher-than-expected inflation or interest rates remain key risks to its forecasts.

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