India Inc holds steady ground as global tariff war looms
Despite global headwinds, the credit ratio for India Inc strengthened in the second half of FY25 — improving to 2.35 times from 1.62 times in H1 FY25, a CareEdge Ratings report said on Tuesday.
The upgrade rate increased to 14 per cent from 12 per cent in the first half of last fiscal (FY25), driven by sectors that benefited from strong domestic consumption and government spending.
Meanwhile, the downgrade rate dropped 200 bps to 6 per cent, driven by asset quality concerns in NBFCs catering to microfinance and unsecured business loans, alongside pricing pressures faced by small-sized entities in the Chemical and Iron and Steel sectors, as well as export-focused Cut and Polished Diamond players.
According to Sachin Gupta, Executive Director and Chief Rating Officer, CareEdge Ratings, the boost in credit ratio is a testament to the resilience of India Inc.
“However, the journey ahead is far from smooth. The imposition of US tariffs could disrupt momentum for export-driven sectors, particularly those reliant on discretionary spending, while also sparking intense price competition from other affected economies,” he mentioned.
That said, not all is bleak as trade agreements and rupee depreciation could offer much-needed relief to exporters.
At the same time, Corporate India’s strong, deleveraged balance sheets act as a sturdy shield against external volatility,” he added.
CareEdge Ratings’ credit ratio for the manufacturing and services sector has seen a notable rebound, with its credit ratio rising from 1.21 in H1 FY25 to 2.06 in H2 FY25.
The uptick reflects improving business fundamentals, particularly among mid-sized, domestic-focused entities, even as global headwinds persist.
Ranjan Sharma, Senior Director, CareEdge Ratings (Corporate Ratings), noted the broad-based nature of this recovery, stating, “The improvement in credit ratio was evenly spread across both investment grade and sub-investment grade rating categories, driven by mid-corporate players leveraging strong domestic demand”.
“Large corporates, too, maintained a healthy credit ratio, continuing their stable performance from previous periods. The sectors leading the upgrade wave included capital goods, automotive and automotive components, and real estate, all of which benefited from rising consumption and momentum in infrastructure,” Sharma maintained.
The services sector also witnessed sustained improvement, with hospitality and healthcare continuing their strong upward trajectory, while pharmaceuticals remained a consistent performer, reinforcing its long-standing resilience.
The credit ratio of the infrastructure sector witnessed a continued uptrend in H2FY25 to 3.94, with the transport infrastructure and power sectors leading the upgrades.
The Banking, Financial Services, and Insurance (BFSI) sector experienced a sharp moderation in its credit ratio, declining from 2.75 in H1 FY25 to 1.07 in H2 FY25, reflecting emerging stress in select lending segments
