MSMEs revenue growth likely to moderate to 7.5-8.5% in FY27 amid West Asia conflict: Crisil Intelligence
Crisil Intelligence in its latest MSME Report has said that India's micro, small and medium enterprises (MSMEs) are expected to see slower revenue growth and weaker profitability in the current financial year (FY27) as the ongoing West Asia conflict heavily disrupts India's supply chains and rising energy-linked input costs. It said revenue growth for MSMEs is projected to moderate to 7.5-8.5 per cent in fiscal 2027, down by 100 basis points compared with FY26, while earnings before interest, tax, depreciation and amortisation (EBITDA) margins are expected to decline by 50-100 basis points to 5-5.5 per cent.
The report stated that amid the Covid-19 pandemic, large players had seen revenue decline by up to 1 per cent in FY20 and FY21, while MSMEs experienced a 3-5 per cent drop. The EBITDA margin of MSMEs had also declined 80 bps to 4.7 per cent in FY21. It said the West Asia crisis is following a similar pattern, with small businesses bearing a disproportionate burden.
However, the report pointed out that MSMEs face a dual challenge this time round: first, production cuts and revenue losses due to reduced availability of raw material such as gas and, second, margin compression stemming from trade disruptions and limited pricing power to pass on increasing commodity and energy costs. Based on impact, Crisil Intelligence classified affected MSMEs into three broad categories--those dependent on energy-related raw materials such as gas, those reliant on energy-linked derivatives and those vulnerable to trade disruptions.
