Moody's downs ONGC, GAIL currency ratings

Moody's, on Thursday, downgraded the local currency rating of Oil and Natural Gas Corporation (ONGC) and GAIL (India). While the rating of ONGC has been downgraded to Baa1 from A2, in the case of GAIL India, it has downgraded to Baa2 from A3. The rating is now aligned with GAIL's Baa2 foreign currency rating, which has been affirmed by Moody's. However, it said, the outlook for the rating of GAIL and ONGC was stable, according to a press note put on the website of the rating agency. Giving the rationale for the ratings, it said the actions reflected Moody's view that ONGC and GAIL ultimately could not be completely de-linked from the credit quality of the Indian Government (Baa3, stable), and, thus, their ratings need to more closely reflect the risk that they shared with the sovereign. “Moody's believes that there has been no deterioration in the intrinsic credit quality of either ONGC or GAIL. Both companies are still viewed as government-related issuers and Moody's continues to assess the expectation of support from the sovereign as strong for GAIL and high for ONGC,'' the statement said. It said a weaker sovereign had the potential to create a ratings drag, and, therefore, it was appropriate to limit the extent to which these issuers were rated higher than the sovereign, in line with the Moody's Rating Implementation Guidance. It said both issuers (ONGC and GAIL) remained rated above the sovereign as a reflection of their stronger credit quality, but the gap was smaller than before. Moody's stressed that the rating actions were not an indication of deteriorating sovereign risk; the sovereign rating remained unchanged at Baa3 with a stable outlook. Keywords: rating agency, Moody's, ONGC, GAIL, credit rating