Crisil Ratings’ credit ratio for India Inc (the number of rating upgrades to number of downgrades) declined a tad in the second half (H2) of FY25 to 2.64 times against 2.75 times in the first half.
However, it expects the credit quality outlook for India Inc to remain positive amid global uncertainties, with upgrades expected to outnumber downgrades in fiscal 2026. In all, there were 423 upgrades and 160 downgrades during H2FY25.
On the changes in the US trade policy and imposition of reciprocal tariffs, the rating agency noted that except for smartphones, other sectors are likely to see low to moderate impact on their business risk profiles.
Strong corporate balance sheets will provide adequate room to absorb this impact without affecting credit quality materially, it added.
Crisil Ratings said the reaffirmation rate rose to 83% from ~80%, surpassing the 10-year average of 82.5 per cent for the first time since fiscal 2022. It noted that the increase indicates greater stability in the credit quality outlook of India Inc. The agency expects reaffirmation rates to remain range-bound at current levels.
The upgrade rate moderated to 12.2 per cent from 14.5 per cent but was still above the 10-year average of 11 per cent. Upgrades were driven by infrastructure and related sectors, such as construction and engineering, capital goods, and secondary steel.
The downgrade rate fell to 4.6 per cent from 5.3 per cent, below the 10-year average of ~6.4 per cent. Downgrades were seen in the export-linked sectors, such as specialty chemicals, cotton spinning, and home furnishing, due to global headwinds.
India Inc to benefit from urban consumption
Subodh Rai, Managing Director, Crisil Ratings, said corporate India would benefit from the urban consumption spur driven by budgetary tax cuts, easing inflation and expected reduction in interest rates.
Further, steadfast spending on infrastructure will have a positive multiplier effect and support linked sectors. To boot, India Inc’s low capex intensity and balance sheet strength (median gearing estimated at ~0.5 times at the end of fiscal 2025) offer ample cushion against global shocks.
The agency assessed that the median revenue growth for corporates in its rated portfolio is likely to improve to ~8 per cent in fiscal 2026 from ~6.5 per cent in fiscal 2025, supported by consumption-driven sectors and would be largely volume-led, while the median EBIDTA (earnings before interest, depreciation, taxes and amortisation) margin is seen sustaining at current levels on benign energy and commodity prices.
It opined that three large corporate sectors — capital goods, construction (roads and bridges), and retail — are likely to benefit the most from the drivers of domestic demand.
The performance of sectors linked to global markets — specialty chemicals, diamond polishers and agrochemicals — remains monitorable. These are exposed to exogenous uncertainties and face headwinds from moderating global growth.
