Asia Press Agency

Tag: Moody’s

  • Moody’s Predicts Global Generative AI Spending

    Moody’s Predicts Global Generative AI Spending

    Moody’s, the financial services firm, predicts that global enterprise spending on generative artificial intelligence (AI) will surpass $150 billion by 2027, contributing to the estimated $500 billion global AI spending in the next three years. The positive outlook for generative AI adoption could present significant business prospects for India’s IT services industry, which has been gearing up to meet the rising demand for this transformative technology.

     

    Despite challenges such as the availability of quality data and cybersecurity concerns, Moody’s anticipates that enterprise adoption of generative AI will continue to grow. The rating agency notes that rapid innovation in AI technologies, coupled with the development of fundamental technologies, will drive increased spending and implementation of generative AI in the coming years.

     

    In a note to investors, Moody’s highlighted the potential impact of generative AI on various industries, identifying banking and insurance, as well as manufacturing, as sectors where deployment is expected to accelerate faster than others. The agency pointed out that sectors with substantial staff costs and large datasets are likely to benefit the most from generative AI adoption.

     

    The positive projections align with the efforts of India’s IT services industry to build capabilities and train employees in generative AI. Despite a challenging financial year, top IT services firms have been investing in the development of generative AI expertise, anticipating increased demand for this innovative technology.

     

    Moody’s emphasized that while the AI industry is growing rapidly among tech companies, progress among non-tech firms will be gradual. The note mentioned that most issuers may not experience significant changes in their credit quality before 2026, as firms need time to identify use cases, build expertise, test new technologies, and navigate evolving regulations.

     

    The rating agency expects the adoption of generative AI to pick up momentum beyond 2026, highlighting that sectors with sizeable staff costs and extensive datasets will witness substantial benefits. However, Moody’s also cautioned that enterprises failing to embrace generative AI adoption may face potential credit rating impacts in the long term.

     

    As generative AI continues to evolve as a transformative force in the technology landscape, its growing prominence is anticipated to contribute to the resilience and innovation of enterprises worldwide. The positive outlook provided by Moody’s suggests a promising future for generative AI, reinforcing its significance in shaping the global business landscape.

  • Moody’s Downgrades Vedanta Resources’ CFR

    Moody’s Downgrades Vedanta Resources’ CFR

    Moody’s Investors Service has taken the decision to downgrade Vedanta Resources Limited’s (VRL) corporate family rating (CFR) from Caa1 to Caa2, citing increased risks of debt restructuring in the near future. This downgrade also applies to the senior unsecured bonds issued by Vedanta Resources and its wholly owned subsidiary, Vedanta Resources Finance II Plc, which are guaranteed by Vedanta Resources.

     

    The rating agency defines a Caa3 rating as highly speculative with a likelihood of being near or in default but some potential for recovering principal and interest, while a Caa2 rating is within the speculative grade and is considered of poor standing with a very high credit risk.

     

    The primary reason for the downgrade is the perceived elevated risk of debt restructuring that VRL faces in the next few months, particularly concerning the $1 billion bonds maturing in January 2024 and August 2024. Despite VRL’s relatively strong consolidated debt/EBITDA leverage of 3.7x as of March 2023, which is substantial for its Caa-rated category, the company has encountered difficulties in refinancing its debt due to reduced interest from the lending community.

     

    In an effort to alleviate some of the financial pressure caused by its imminent cash requirements, VRL sold a 4.3% stake in key subsidiary Vedanta Limited for approximately $500 million in August 2023.

     

    Moody’s also highlighted the concentrated ownership structure of VRL, with sole shareholder Volcan Investments, as a source of elevated risk for related party transactions that could impact creditors negatively. Additionally, several senior management departures in recent years pose risks to the continuity and stability of VRL’s operations.

     

    The negative outlook assigned by Moody’s reflects VRL’s persistently weak liquidity profile and the rating agency’s concerns about the company’s ability to address its immediate cash needs, particularly at the holding company level.

     

    This downgrade follows a previous move by Moody’s earlier this year when it downgraded VRL’s CFR to Caa1 from B3 and also downgraded the ratings on the senior unsecured bonds issued by VRL to Caa2 from Caa1. The agency noted that VRL had reduced approximately $2.0 billion of its debt during fiscal 2023.

     

    Moody’s emphasized that Vedanta’s liquidity remains persistently weak, with management fees and dividends from operating subsidiaries insufficient to cover its upcoming debt maturities. However, the agency views maintaining liquidity and proactive liability management as more crucial for preserving VRL’s credit quality than debt reduction, given its Moody’s-adjusted consolidated gross debt/EBITDA remains around 4.0x, comfortably below the previous downgrade trigger of 5.5x.

     

    On the stock market, Vedanta’s shares settled at ₹224.05 apiece on the BSE, marking a 0.27% change on Tuesday. The ongoing challenges and credit risks faced by Vedanta Resources Limited continue to be closely monitored by financial analysts and investors.

  • India Reaffirms Confidence in Aadhaar Technology

    India Reaffirms Confidence in Aadhaar Technology

    In a recent development, India’s Unique Identification Authority of India (UIDAI) has responded robustly to concerns raised by Moody’s Investors Service regarding the country’s Aadhaar digital ID system. Moody’s had expressed doubts about Aadhaar’s reliability and noted instances of service denials in its report, which sparked a response from UIDAI.

     

    UIDAI issued a strong rebuttal, stating that Moody’s had made sweeping assertions against Aadhaar without providing any concrete evidence or basis for its claims. UIDAI also pointed out that over a billion Indians have expressed their trust in Aadhaar by using it over 100 billion times for authentication over the past decade.

     

    The Union Ministry of Electronic and IT also criticized Moody’s report, stating that it failed to provide any primary or secondary data or research to support its opinions and assertions about Aadhaar.

     

    One of the key concerns raised by Moody’s was regarding the reliability of biometric technologies used in the Aadhaar system, particularly for manual laborers. In response, the Indian government clarified that certain schemes, such as the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), do not require biometric authentication for payments. Instead, workers receive their payments directly credited to their bank accounts.

     

    The government further emphasized that Aadhaar offers multiple methods for biometric submission, including contactless means such as face authentication and iris authentication. Additionally, many use cases allow for mobile OTP authentication, providing flexibility and convenience to users.

     

    Addressing the security and privacy concerns raised by Moody’s, the government stated that no breach has been reported from the Aadhaar database to date. It reiterated that Aadhaar’s security measures and privacy safeguards are robust and effective.

     

    The government also highlighted that Aadhaar has received praise and recognition from global institutions such as the International Monetary Fund (IMF) and the World Bank. These organizations have acknowledged the significant role played by Aadhaar in advancing financial inclusion in India.

     

    Aadhaar, issued by UIDAI, is a pioneering digital ID system that assigns a unique number to individuals based on their biometric data, including fingerprints, facial recognition, and iris scans. This digital ID has been instrumental in streamlining various government programs and services, including financial inclusion initiatives and social welfare schemes.

     

    The response from UIDAI and the Indian government underscores their unwavering commitment to the security and reliability of the Aadhaar digital ID system. They have emphasized Aadhaar’s pivotal role in India’s digital identity landscape and its contribution to empowering citizens by providing access to essential services and benefits.