95
/ 3
Min Read
India Inc’s credit profile remained resilient in the first half of the current fiscal despite rising global uncertainties and export headwinds. According to Crisil Ratings, the credit ratio — the number of rating upgrades to downgrades — stood at 2.17 times in H1 FY26, down from 2.75 times in the same period last year, but still indicative of broad-based credit strength.
A total of 499 upgrades and 230 downgrades were recorded between April and September 2025. The reaffirmation rate remained high at ~80%, highlighting the continued stability of corporate credit quality. The upgrade rate of around 14% was higher than the 10-year average of 11%, while the downgrade rate held steady at 6.4%, in line with historical trends.
Domestic Strength Outweighs Global Weakness
The resilience is largely driven by strong domestic demand, government-led infrastructure capex, and lower inflation and interest rates. Infrastructure-linked sectors such as construction, roads, renewables, capital goods, and secondary steel led the upgrades, accounting for nearly 45% of the total.
“Timely project execution, healthy order books, and improved revenue visibility have boosted credit quality in infrastructure and allied sectors,” said Subodh Rai, Managing Director, Crisil Ratings.
On the consumption side, FMCG, hospitality, and real estate also benefited from easing inflation, income tax relief, and steady demand recovery.
Export-Linked Sectors Under Pressure
Sectors heavily reliant on exports, particularly to the US, saw more downgrades. These included diamond polishing, shrimp exports, and home textiles, which faced the dual challenge of softening global demand and tariff-related pressures. About 30% of downgrades came from such export-focused sectors.
- Diamond polishers: Hit by falling demand and increased competition from lab-grown diamonds.
- Shrimp exporters: Saw frontloaded orders in H1, but face weaker prospects ahead.
- Home textile players: Impacted by potential supply chain shifts among US buyers.
Still, not all export-linked segments are equally vulnerable. Pharmaceuticals saw limited impact due to their focus on generics, which remain outside the scope of recent US tariffs. Readymade garment makers are also better cushioned by robust domestic demand.
Financial Sector Outlook Stable
The credit outlook for banks and non-banks remains steady. Bank credit is expected to grow at 11–12%, while NBFC AUMs are projected to rise by ~18%, similar to last fiscal.
While overall asset quality remains stable, certain pockets — especially MSMEs in export sectors and unsecured lending segments like microfinance — may need close monitoring.
“Corporate balance sheets remain strong, with gearing near decade lows at ~0.5x,” said Somasekhar Vemuri, Senior Director, Crisil Ratings. “We expect revenue growth of ~8% and stable Ebitda margins of ~12%, providing companies room to navigate any global turbulence.”
Outlook: Cautious Optimism
Despite external challenges, the outlook for corporate credit remains cautiously optimistic, supported by domestic tailwinds. Upcoming trade negotiations with the US and EU, along with continued policy support, could soften the impact on export-heavy sectors.
In sum, while global risks remain, India Inc’s credit fundamentals are well-supported by domestic demand, infrastructure momentum, and strong financial discipline.
