Indian companies are boosting their credit profiles by divesting stake in businesses and selling assets or using their free operating cash flows to reduce debt, Standard & Poor’s said on Wednesday.
“More Indian companies are improving their high financial leverage and boosting their credit profiles by adopting measures such as sale of equity and assets or using their free operating cash flows to reduce debt,” S&P Ratings Services said in a statement.
Weak economy and high interest rates in India, which have adversely affected cash flows and debt-servicing ability, have prompted the companies to improve their financial profiles.
“Another reason is companies are refocusing on reducing debt after years of investing significantly on rapid growth,” S&P Credit Analyst Mehul Sukkawala said.
“Besides raising equity and selling non-core assets, Indian companies are also divesting stakes in businesses,” Sukkawala added.
S&P also noted that companies in the infrastructure sector with very high leverage are also considering selling assets or stakes in subsidiaries to improve their debt- repayment ability and liquidity.