By raising India's credit rating, S&P affirms optimism about growth
S&P has projected the Indian economy to grow from around $3.9 trillion in 2024 to about $5.5 trillion by 2028, with growth averaging roughly 6.8 per cent over the next few years. This is marginally higher than other assessments, such as by the IMF. In its April World Economic Outlook, the Fund had pegged the economy to grow at around 6.3 per cent over this period. The ratings agency is strikingly less pessimistic about the impact of Trump's tariffs on the Indian economy, expecting it to be 'manageable' and not pose a 'material drag on growth'. This is based on its view that India is 'relatively less reliant on trade' (exports to US are roughly 2 per cent of GDP), and more on domestic consumption. There is, however, a cautionary note here. This assessment is at odds with views expressed by several analysts who believe that not only will there be a direct impact of high tariffs but that there will also be an indirect impact which could reflect in the form of lower investment flows into the country.
The government's debt-deficit dynamics is another area of improvement flagged by the ratings agency. General government debt (Centre and states put together) had surged during the pandemic. However, since then, governments have stayed on the path of consolidation, bringing down their deficits and debts. The ratings agency expects the general government deficit to fall from 7.3 per cent of GDP in 2025-26 to 6.6 per cent by 2028-29. Alongside, it projects the debt to GDP ratio to decline from 83 per cent in fiscal 2025 to 78 per cent by fiscal 2029, bringing it 'closer to its pre-pandemic level.' While progress has been faster than what was envisaged by the Finance Commission, the path of consolidation must continue to be adhered to. S&P has, in fact, cautioned about not doing so, saying that 'We may lower the ratings if we observe an erosion of political commitment to consolidate public finances.'
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Economic Times
7 minutes ago
- Economic Times
Telcos' operating profit likely to grow 12-14% this fiscal on data surge: Crisil Ratings
Synopsis India's telecom industry is projected to see a 12–14% rise in operating profit, reaching ₹1.55 lakh crore in FY26, driven by higher data consumption and rising ARPU, Crisil Ratings said. ARPU is set to rise to ₹220–225 from ₹205, aided by 5G rollout and premium data plans. Lower capex post-5G rollout is expected to boost free cash flow to ₹70,000 crore, improving credit profiles. ANI The operating profit of telecom companies in India is expected to grow 12-14 per cent to about Rs 1.55 lakh crore this fiscal, driven by more data consumption and rise in average revenue per user, Crisil Ratings said on Monday. The "robust" operating performance, along with declining capital expenditure intensity of leading players post 5G rollout, is seen improving free cash flow, supporting credit profiles of leading players in the industry. The telecom industry benefits from high operating leverage, Crisil Ratings said adding that its analysis suggests that every Re 1 increase in ARPU adds Rs 850-950 crore to the industry's operating profit. "Operating profit (Ebitdar or Earnings before interest, taxes, depreciation, amortisation and payment of lease rentals) of India's telecom companies will grow a strong 12-14 per cent to about Rs 1.55 lakh crore this fiscal, driven by surging data consumption and a consequent increase in the average revenue per user (ARPU)," Crisil Ratings said in a release. The analysis of three telcos, with about 93 per cent of subscriber market share, indicates as much, it added. The operating profit metrics last fiscal, grew at about 17 per cent, lifted predominantly due to tariff hikes. This fiscal, however, the growth will be supported by strong intrinsic factors, as per Crisil Ratings. ARPU is expected to climb to Rs 220-225 this fiscal from Rs 205 last fiscal, largely on account of rising data consumption, according to Anand Kulkarni, Director of Crisil Ratings. "Wider availability of 5G network, with penetration expected to touch 45-47 per cent by March 2026 from about 35 per cent as of March 2025, is fuelling data consumption for applications such as social media, video streaming, gaming, generative artificial intelligence and digital marketing," Kulkarni said. The data usage is expected to increase to 31-32 GB in FY26 from about 27 GB in the previous fiscal. "Additionally, the Indian telcos have been rebalancing their offerings by reducing plans with low data limit or offering 5G services only on plans offering higher data limit. This trend is expected to move consumers to premium plans, boosting telco ARPU," Kulkarni added. With rising demand for data-driven services, telcos have introduced premium plans that bundle over-the-top (OTT) services, a strategy that also helps telcos upselling and raise their ARPUs. Moreover, internet penetration in rural and semi-urban areas is expected to increase by 4-5 per cent rising to 82 per cent by fiscal 2026. Users shifting from voice-only plans to data plans will further boost ARPU. Typically, a voice-only plan with validity of 28 days is priced about Rs 100 lower than an entry level data plan of the same validity. Increase in ARPU results in surge in operating profit, given that about 60 per cent of the overall cost of telcos are fixed in nature, Crisil Ratings explained. "Thus, telecom industry benefits from high operating leverage and our analysis suggests that every Re 1 increase in ARPU adds Rs 850-950 crore to the industry Ebitdar," it said. The expansion in operating profit will also improve free cash flow because of lower capex requirements. Nitin Bansal, Associate Director, Crisil Ratings noted that capex intensity, at 31 per cent average over the past two fiscals, is expected to moderate to 24-26 per cent this fiscal as a large part of 5G network rollout has been completed by the leading telcos. Further, most of the spectrum purchase was completed in fiscal 2023 and next significant spectrum renewal are due in 2030. "This will result in healthy operating free cash flow of around Rs 70,000 crore this fiscal, a large part of which will likely be utilised for debt reduction," Bansal said. As a result, net leverage is estimated at about 2.7 times this fiscal, a cool off from 3.4 times in fiscal 2025. "This augurs well for the credit profiles, especially for the leading telcos," Bansal added. Crisil Ratings' assessment does not factor in any tariff hike this fiscal and the release added that any tariff hike will have an upside for ARPU, resulting in further improvement in free cash flows this fiscal and the next.
The Hindu
10 minutes ago
- The Hindu
Sensex jumps 676 points, Nifty up 1% as GST reform bid sparks rally
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Business Standard
10 minutes ago
- Business Standard
Sensex, Nifty extend gains for 3rd day; auto shares gear up
The domestic equity benchmarks ended with major gains today, driven by easing concerns over Russian oil supplies following a U.S.-Russia meeting, as well as optimism around potential GST reforms and a recent upgrade to Indias credit rating. On the occasion of Independence Day, Prime Minister Narendra Modi announced that the government is planning to implement generational GST reforms before Diwali a move expected to benefit key sectors such as auto, FMCG, and consumer goods. The Nifty settled above 24,850 mark. Auto, consumer durables and metal shares advanced while IT, media and pharma shares declined. As per provisional closing data, the barometer index, the S&P BSE Sensex, rallied 676.09 points or 0.84% to 81,273.73. The Nifty 50 index added 245.65 points or 1% to 24,876.95. In the past three trading sessions, the Sensex and Nifty jumped 1.29% and 1.59%, respectively. In the broader market, the S&P BSE Mid-Cap index rose 1% and the S&P BSE Small-Cap index added 1.39%. 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The company has received final approval from the US Food and Drug Administration (USFDA) for its Abbreviated New Drug Application (ANDA) Tretinoin Cream USP, 0.025%. Signpost India surged 10.06% after the company reported a 36.1% increase in consolidated net profit to Rs 15.27 crore on 37.01% jump in revenue from operations to Rs 137.64 crore in Q1 FY26 compared with Q1 FY25. EMS rose 1.15% after the company announced that it has received a letter of acceptance (LoA) from UP Jal Nigam (Urban) for a project worth approximately Rs 104.05 crore. Electronics Mart India surged 7.70% after the company announced the commencement of operations of a new multi-brand store under the 'Bajaj Electronics' brand. KEC International surged 5.26% after the company announced that it has secured new orders worth Rs 1,402 crore across its key business verticals. Zaggle Prepaid Ocean Services rallied 11.52% after the companys standalone net profit surged 54.8% to Rs 25.88 crore on a 31.4% increase in revenue from operations to Rs 331.49 crore in Q1 FY26 over Q1 FY25. Lemon Tree Hotels jumped 5.27% after its material subsidiary, Fleur Hotels, has received a letter of award (LoA) from the Delhi Development Authority (DDA) for the licence rights to a prime land parcel in Nehru Place, New Delhi. Brahmaputra Infrastructure hit an upper limit of 5% after its consolidated net profit soared 121.82% to Rs 15.04 crore in Q1 FY26 as against Rs 6.78 crore posted in Q1 FY25. Total income from operations jumped 16.07% year on year to Rs 92.14 crore in the quarter ended 30 June 2025. Global Markets: European stocks traded lower on Monday as investors awaited a key meeting between regional leaders and U.S. President Donald Trump to discuss the ongoing Ukraine conflict. Markets in Asia ended in a mixed manner after the U.S.-Russia summit concluded without a ceasefire. As per media reports, U.S. President Donald Trump now seemed more aligned with Moscow on seeking a peace deal with Ukraine instead of a ceasefire first, after meeting Russian President Vladimir Putin in Alaska on Friday. The reports further state that Trump will meet Ukrainian President Volodymyr Zelenskiy and European leaders later on Monday to discuss the next steps, though actual proposals are vague as yet. US stocks were mixed on Friday as Wall Street tempered its rate-cut hopes amid economic data this week that showed higher-than-expected wholesale inflation and a rise in July retail sales. The Dow rose 0.08%, or 34.86 points, to 44,946.12. The S&P 500 slipped 0.29%, or 18.74 points, to 6,449.80; and the tech-heavy Nasdaq dipped 0.4%, or 87.693 points, to 21,622.977. The US Census Bureau data released Friday morning showed retail sales rose 0.5% in July from the prior month. Meanwhile, US consumer sentiment deteriorated in August, falling for the first time in four months as inflation expectations jumped in the longer term. The US Fed will continue to be in focus this week as central bank members travel to Jackson Hole, Wyoming, for the annual economic policy symposium.
