India’s top firms to outperform Chinese peers, say S&P reports

MUMBAI: India’s top companies are set to outperform their Chinese peers despite the country’s infrastructure bottlenecks, said two reports by Standard and Poor’s

MUMBAI: India’s top companies are set to outperform their Chinese peers despite the country’s infrastructure bottlenecks, said two reports by Standard and Poor’s Global Ratings agency.

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“Our analysis of India’s top 200 companies by market capitalisation against their Chinese counterparts shows that government influence is far greater for listed companies in China than in India,” said S&P Global Ratings credit analyst Mehul Sukkawala. “This directly affects companies’ flexibility to reduce capital spending, generally results in weaker profitability, and shows up in higher leverage.”

Reports titled ‘India’s Top Companies Set To Gain Even As China’s Continue To Feel The Pain’ and ‘The Missing Piece In India’s Economic Growth Story: Robust Infrastructure’, highlight that the difference in the size of the private sectors in India and China is significant.

Private entities account for about 75% of net debt and EBITDA (earnings before interest, tax, depreciation and amortisation) of the top 200 Indian companies, compared with less than 20% for the top Chinese companies. Indian private companies outperform both the domestic government-related entities (GREs) and Chinese companies by registering the highest and relatively stable returns.

The performance is also reflected from the way indices covering these companies have moved in the past year. Bombay Stock Exchange’s BSE200 index rose by 2.3% compared to a 20% fall in the Shanghai Stock Exchange’s SSE 180 index. The indices cover the 200 and 180 biggest listed companies in India and China respectively.