India seeks to boost local brands as higher US tariffs loom
ANSWER: Instead of providing subsidies, the government is pushing Indian exporters to build and promote brands as branded products command a value which affluent American consumers may be willing to pay for. The brand promotion exercise would be undertaken jointly by export promotion councils and the India Brand Equity Foundation. Incentives may be given under an employment-linked scheme for certain industries such as those dealing in leather and marine products. This would benefit both the domestic and export sectors as a result of higher production and lower costs, thereby mitigating the effect of the increased tariff rate. While some countries competing with India enjoy a lower rate of tariff, they may not be able to create adequate capacities immediately to meet the shortfall and therefore Indian goods will continue to meet the demand in the United States.
Lower cost of credit on account of an interest equalisation scheme for pre- and post-shipment export credit will also blunt the tariff hike. Around 25 per cent of goods exported will be outside the ambit of tariffs. Pharmaceutical goods, petroleum products and electronics are not covered by the higher tariff. Likewise, semiconductors, smart phones and electronic products are not affected. Some Indian manufacturers are likely to shift their production lines to the UAE from where goods would be exported to the United States which would attract the baseline tariff rate of 10 per cent.
Question: Are adequate steps being taken in India to develop the cloud market for storing data applications and infrastructure?
ANSWER: Indian companies in the private sector are gaining strength to challenge bigger global rivals in the fast growing cloud market. They are able to take on foreign hyperscalers by positioning themselves as affordable and secure alternatives with cost savings of 30 per cent to 50 per cent compared to the large international cloud providers. Hyperscalers are large cloud providers having massive computing resources with related infrastructure and offer free cloud credits and start up support. Indian companies are rapidly building technical sophistication, security credentials and operational scale to effectively compete with established global platforms.
The Indian government is encouraging companies to provide cloud solutions for ensuring compliance and security of core applications and data, especially to enterprises in the banking, financial services and insurance space. Global hyperscalers have grown their footprint in India by entering into agreements with mobile phone operators for development of affordable cloud-based solutions. These are widely used by startups and small and medium enterprises which have been slow in moving to sovereign cloud on account of high costs and risks associated with migrating applications which are time consuming and cause business disruptions. Currently, the cloud market revenue in India stands at $8.3 billion.
Question: Gold prices have shot up in India in the last one year, as well as internationally. Will this affect purchase of gold ornaments which will be in demand in the festive and wedding seasons?
ANSWER: The demand for gold is certainly muted due to rising prices, as evident from the figures for the first quarter April-June of this financial year. According to estimates of the World Gold Council, the rising price of gold has impacted jewellery consumption with demand falling by 17 per cent year-on-year to around 89 tonnes in this quarter. However, according to their estimate, the high price of gold has boosted the demand on the investment front, an increase of 7 per cent year-on-year. Thus, there seems to be a strategic commitment among investors to purchase gold as a long term store of value.
The projected demand for the current year is estimated at 600 to 700 tonnes. Gold prices have been highly volatile due to multiple factors, including geo- political uncertainties, and the price of the metal in India crossed100,000 for 10 grams on April 22, 2025, though subsequently it has come down. Gold recycling has remained at a modest figure of 1 per cent, indicating that consumers and investors are holding on to their assets with confidence in its true intrinsic value.
HP Ranina is a practising lawyer, specialising in corporate and fiscal laws of India.
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Rating Action Overview We expect that Abu Dhabi-based renewable energy group Abu Dhabi Future Energy Company PJSC - Masdar (Masdar), primarily owned by the Emirate of Abu Dhabi, will benefit from very strong levels of financial support from the government, both extraordinary and ongoing, on the back of the group's strategic mandate as the key vehicle for the country to achieve its ambitious clean energy transition targets by 2050. Masdar's operating and growth model is unique and is symbiotic in many ways with the Emirate of Abu Dhabi. This supports our view of Masdar's credit rating being very close to, although not aligned with, the rating on Abu Dhabi, and the ratings on both entities are likely to evolve in tandem in the future. Masdar benefits from an established global market position in the clean energy development business, a diversified capacity base, and an ambitious growth strategy sponsored by the government. We also recognize that the company's strong investment appetite creates inherent execution risk in business expansion and its financial leverage is very high. We therefore assigned our 'AA-' long-term issuer credit rating on Masdar. The outlook is stable, reflecting the outlook on our sovereign rating on Abu Dhabi. Rating Action Rationale We think that Masdar has an extremely high likelihood of receiving timely and sufficient financial support from the government of Abu Dhabi. The group has the very important role of leading the emirate's renewable goals, and it benefits from having integral ties with the state government. This results in six notches of uplift from Masdar's stand-alone credit profile (SACP) of 'bbb-', leading to an 'AA-' long-term issuer credit rating. Masdar retains priority on the mandate for renewable energy for Abu Dhabi, being a key vehicle for the United Arab Emirate (UAE) in achieving its goals of tripling renewable energy by 2030. The UAE government has pledged to make the country carbon neutral by 2050 and plans to invest heavily in alternative energy sources that are both renewable and clean (see "Abu Dhabi," May 26, 2025). Masdar also plays a key role as a vehicle for strengthening ties with partner countries through the development of non-utility scale special projects. There is ample evidence and a solid track record of state support to accompany Masdar's growth. The group has thus far received over UAE dirham (AED) 20 billion in equity support from the government to finance its acquisitions on growing platforms. We think that the Emirate of Abu Dhabi is willing and able to provide extraordinary financial support should Masdar experience financial stress, particularly because Masdar's reputation globally is closely linked to that of its ultimate owner. Chart 1 Over AED20 billion in equity support to finance acquisitions on growing platforms Acquisitions help enhance portfolio quality and provide diversification benefits Masdar's strategy of acting as a platform investor and aggregator has significantly expanded its scale and diversity. From 2021 to March 2025, Masdar's gross capacity (considering operational, under construction, and committed projects) increased to 33 gigawatt (GW) from 15 GW. This trajectory was backed by a dual business model that combines greenfield development with strategic acquisitions--each supported by appropriate funding sources. The company has a portfolio of geographically diverse assets in strategic locations across the globe and exposed to well-proven renewable technologies, notably utility-scale solar photovoltaic (PV) and onshore wind capacity, which together account for more than 80% of Masdar's generation base. Different from its rated peers, Masdar does not carry operations in-house, but rather adopts an investor approach, outsourcing operating and construction risk to third-party contractors. Masdar's competitive advantages stem from both: Hard factors: A large, low risk asset base of its cash flow generation with 97% of revenues being generated through take-or-pay contracts with a weighted average remaining contract life of about 16 years; and Soft factors like government backing and a clear strategic mandate Although Masdar's investment appetite is aggressive, the regular equity injections from the Emirate of Abu Dhabi to finance brownfield acquisitions support the sustainability of the growth strategy and underpin Masdar's sound access to capital markets and good relationships with banks. As of March 2025, Masdar has an identified advanced pipeline of 25 GW, and a long way to reach its target of over 100 GW by 2030. In addition, 15 GW out of its contracted pipeline is under development. Therefore, we cannot rule out some execution risks and high capital expenditure (capex) in its path toward its 2030 target. That said, we think that the government will step in to support Masdar because its activities have strong strategical and reputational significance for the emirate. The continuous support and the privileged access to low-cost financial resources thanks to its government links are a major differentiating factor when assessing the group's financial solidity and capacity to sustain high leverage. Despite Masdar's heightened leverage, the company--which is a pioneer in green bond financing in the UAE--managed to raise about AED10 billion so far in 2025, with a low coupon rate of about 5%. Masdar's strong diversification, government-backed growth model, and hands-off approach to distressed assets all support the deconsolidated financial analysis approach. Unlike many of its peers, Masdar's business model ensures that its financial risk profile is not tied to individual projects or their associated debt. The company's expansion is driven by government capital injections and strategic acquisitions, rather than asset monetization, further limiting its reliance on project-level cash flows. In our assessment of Masdar, we deconsolidate all nonrecourse asset-level debt and cash flows and included the dividend distributions from these projects to calculate its financial metrics. The deconsolidation is not merely because of the nonrecourse nature of the assets, but because we believe Masdar's approach to individual projects in the context of its large portfolio, in terms of business strategy, governance and influence, allows us to do so. We estimate Masdar's leverage (i.e., mostly corporate debt at the parent level) will remain high over the next two years. Masdar's deconsolidated debt-to-EBITDA is likely to increase to 5.0x-6.0x over 2025 and 2026, from 1.8x in 2024, before falling to 2024 levels as all the development activity Masdar has undertaken over the past year--particularly through the acquisitions of growth platforms--become operational and begin generating cash. Masdar's growth mandate is implemented through its disciplined and consistent acquisition strategy and framework which helps provide visibility around the evolution of cash flows. We acknowledge that, within the development cycle, Masdar's leverage ratio would also by cyclical. However, we view the company's track record of disciplined framework when it comes to its financial policy as positive. We would expect Masdar to hold majority ownership and control of its projects to maximize dividend payouts, while ensuring the deconsolidated EBITDA cash interest coverage is close to 2.0x. We would also expect the company to continue with its funding approach whereby greenfield developments are financed with nonrecourse debt at the project level with Masdar's equity being funded via green bonds at the parent level, whereas brownfield acquisitions would remain financed primarily via equity-like shareholder contributions. Equally critical for us is the expectation that Masdar would not support any distressed projects, as has been the case in the past Outlook The stable outlook on Masdar mirrors that on the sovereign rating on the Abu Dhabi (AA/Stable/A-1+), given our view that the company has an extremely high likelihood of receiving timely and sufficient financial support from the Emirate, its ultimate owner. The outlook also reflects our expectation that Masdar will continue to enjoy good funding access as a key government-related entity (GRE) in Abu Dhabi and that the emirate will support Masdar with regular equity injections for brownfield projects to reach the 100 GW target. We also expect that Masdar will maintain stable cash flows and efficient operations at the project-level, which will also support the company's leverage and growth spending over the next 12-24 months. Downside scenario We may lower the rating on Masdar in the next 12-24 months if: We lower the sovereign rating on Abu Dhabi to 'AA-'; We think that government support for the company has weakened. This could happen if Masdar becomes less strategic and integrated with the government. A shortfall or delay in supporting strategic acquisitions, or liquidity pressure on Masdar may also signal weakening of support; or At the current level of government support, the SACP on Masdar weakens by two notches to 'bb'. We think that there is substantial headroom for the 'bbb-' SACP on Masdar, considering the operating model. A downward revision of the SACP would likely be driven by a fundamental departure from existing financial policy, more than point in time credit metrics, which could be inherently volatile. Still, we could lower our assessment of Masdar's SACP by one notch if: The company fails to maintain EBITDA cash interest coverage in line with financial policy, due to an inability to upstream dividends from projects as expected; or The company revises its financial policy and approach to its balance sheet management, by undertaking aggressive recourse debt-funded spending, either to fund acquisitions at corporate level or to support distressed greenfield developments projects. Upside scenario We could upgrade the company if we raise the rating on Abu Dhabi to 'AA+', all else remaining equal. We are unlikely to raise our assessment of Masdar's SACP over the next 12-24 months, as we do not expect the company would be able to meaningfully reduce its leverage, given the company's capital spending plans over the coming years. Company Description Masdar is a registered public joint stock company headquartered in the Emirate of Abu Dhabi. The principal activities of Masdar are to invest or acquire participations in entities in the renewable energy, energy efficiency, carbon reduction, carbon capture and storage, and other forms of sustainability-related technologies and provision of services for reducing carbon emissions. Since its establishment in 2007, Masdar has developed and partnered in projects in over 25 countries globally. Its gross installed capacity as of March 2025 stands close to 17.5 GW, with a mix of solar PV and wind, with a mandate to increase its renewable energy portfolio capacity to 100 GW by 2030. The company is majority-owned (approximately 96% indirectly) by the government of Abu Dhabi, through shareholdings by Abu Dhabi's leading state-owned entities: Mubadala Investment Company, Abu Dhabi National Energy Co., and Abu Dhabi National Oil Co. Our Base-Case Scenario Assumptions Distributions from invested projects of AED2.0 billion-AED2.5 billion in 2025 and 2026, increasing to more than AED3 billion in 2027 following the completion of major constructions. We do not consolidate nonrecourse project-level debt, and our adjusted EBITDA includes our forecast cash distributions, proportionate to the equity ownership of the assets. Our EBITDA also includes annual development, prefinancing, and general and administrative corporate costs. Masdar-level capex of $20 million-$50 million over the forecast period. This excludes the development capex funded by nonrecourse financing. Committed equity contributions from sponsors in 2025 to support capital spending requirements. The company not making distributions to its shareholder but making minority ownership distributions. Approximately $1.5 billion in amortizing operating project-level debt in the forecast period. We note that the debt is in proportion with consolidated projects equity ownership. Key metrics Liquidity We assess Masdar's liquidity as adequate, because we expect the company's ratio of liquidity sources to uses to be about 1.6x over the 12 months ending March 31, 2026. Given Masdar's status as a GRE, it has strong banking relationships and satisfactory standing in credit markets onshore and offshore, which is supported by its low coupon rate. Masdar also has a degree of flexibility to lower capex and acquisition spending, if needed. Principal liquidity sources AED2,800 million of unrestricted cash and cash equivalents for the next 12 months; and Cash funds from operations of about AED1,000 million for the next 12 months. Principal liquidity uses No debt maturities for the next 12 months; Expected capex of AED10,000 million for the next 12 months (operating and mergers and acquisitions); and No expected dividend payments of AED944 million for the next 12 months Covenants The group's nonrecourse project financing indebtedness typically contains covenants, including debt-service coverage ratio covenants, which can restrict distributions to Masdar unless the terms are met. We acknowledge that in 2023 and 2024, the solar PV projects under construction in Uzbekistan experienced technical breaches with no financial impact for Masdar. Environmental, Social, And Governance Environmental factors are a positive consideration in our credit analysis of Masdar. The company specializes within the renewables sector, promoting clean energy solutions and abates 14 million tons of carbon dioxide emissions annually. Masdar aims to spearhead the UAE's net zero by 2050 target and actively engages in exploring innovative technologies and partnerships that advance sustainability. Masdar's commitment to sustainability and innovation is evidenced through its involvement in the exploration of hydrogen production since 2008. Socially, Masdar remains cognizant of its responsibilities and engages local communities through education initiatives and job creation. Governance-wise, environmental, social, and governance activities are spearheaded at the board level through its Sustainability, Strategy and Investment Committee ensuring the company remains on track to develop a global clean energy portfolio with gross capacity of 100 GW by 2030. 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