Moody's Gave Positive Ratings to TCS, Infosys and RIL

Moody's Investors Service has rated Tata Consultancy Services (TCS), Infosys and Reliance Industries above the sovereign due to their strong financials and significant global earnings.

Moody's said the stable outlooks on Genpact and UPL Corporation, in contrast to the negative outlook on India's Baa3, rating reflect that they can maintain their current ratings if the sovereign was downgraded to Ba1.

Two other companies' ratings are capped at the same level as the sovereign rating. Oil and Natural Gas Corporation's and Petronet LNG's credit quality is also stronger than the sovereign's. But their ratings are capped at Baa3 because of their strong links with the government or other government-owned entities.

Investment-grade IT companies' global operations and minimal reliance on domestic funding allow them to be rated up to two notches above the sovereign. TCS and Infosys are rated two notches above the sovereign.

Their credit profiles and geographical diversification are substantially stronger than Genpact's. Still, Genpact will likely maintain its current rating should the sovereign get downgraded to Ba1.

Large scale, diversified business and balanced funding mix allow Reliance to be rated one notch above the sovereign. Still, Reliance's digital services and retail businesses have increased its links to India's economy. Thus it does not meet the criteria to be rated two notches above the sovereign even if its credit metrics warrant such an assessment.

UPL's globally diversified customer and manufacturing base, and limited reliance on domestic funding sources allow it to be rated one notch above the sovereign. The company's stable outlook despite the sovereign's negative outlook reflects that UPL will maintain its current ratings even if the sovereign is downgraded to Ba1, all other things remaining the same.

Moody's said ratings of 9 of the 11 investment-grade companies will likely be downgraded by one notch if the sovereign rating falls to Ba1. Only UPL and Genpact are likely to maintain their current Baa3 ratings.

TCS, Infosys and Reliance will continue to retain their investment-grade status even at lower ratings. But the six government-owned or government-linked companies will lose their investment-grade ratings.