India’s corporate sector showed resilience in the second half of fiscal 2025 (FY25), with Crisil Ratings reporting a credit ratio of 2.64 times, though a slight dip from 2.75 times in the first half.
Subodh Rai, Managing Director of Crisil Ratings, presented the report on April 1 in Mumbai.
This ratio, derived from 423 upgrades against 160 downgrades, reflects the strength of domestic tailwinds like urban consumption growth and infrastructure spending, even as global economic challenges persist, said the report.
The reaffirmation rate climbed to approximately 83 percent, surpassing the 10-year average of 82.5 percent for the first time since FY22.
Upgrades, though moderating to 12.2 percent from 14.5 percent in the first half, remained above the 10-year average of 11 percent, driven primarily by infrastructure-linked sectors such as construction, engineering, capital goods, and secondary steel, which recorded a 16 percent upgrade rate, the report said.
These sectors have benefited from the government’s sustained push for infrastructure development, a key pillar of economic growth, the report said.
Consumption-driven industries like auto components, ceramics, and hospitality contributed to the positive trend, fuelled by robust domestic demand.
Meanwhile, downgrades dropped to 4.6 percent from 5.3 percent, falling below the 10-year average of 6.4 percent, though export-oriented sectors like specialty chemicals, textiles, and cotton spinners faced pressures from global demand slowdowns, lower cotton yarn spreads, and inventory losses.
Rai said that India Inc’s balance sheets were robust, with median gearing at approximately 0.5 times and low capital expenditure intensity serving as buffers against external shocks.
He projects the median revenue growth to rise to around 8 percent in FY26, propelled by consumption-led sectors, while EBITDA (Earnings before interest, tax, depreciation and amortisation) margins are expected to stabilise amid benign commodity prices.
The presentation, too, echoed this view, citing low corporate leverage, private consumption growth supported by lower inflation, anticipated interest rate declines, and budgetary tax cuts as key drivers for a positive credit outlook in FY26, where upgrades are expected to continue outpacing downgrades.
However, global risks remain a concern, the report said.
Uncertainties in US trade policies and a potential global economic slowdown could impact India’s export performance, with the smartphone sector identified as highly vulnerable due to its dependence on the US market.
Other sectors like steel, aluminium, textiles, home furnishings, and specialty chemicals face moderate risks from dumping and weaker global demand, though pharmaceuticals and capital goods are expected to remain resilient.
Moreover, Somasekhar Vemuri, Senior Director at Crisil Ratings, said that there may be some additional headwinds, including elevated household debt in unsecured loans and broader global uncertainties.
“The government plays a crucial role in mitigating dumping risks through tariff policies,” he added.
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