India Inc ratio of upgrades to downgrades at a decade high as corporates cut borrowings | India News
Mumbai: Despite the triple shock of below normal monsoon, West Asia conflict pushing up crude and commodity prices and US tariff hurting Indian exports India inc is doing well with the ratio of upgrdes to down grade at a decadal high of 3.2x. According to rating agency ICRA the sound fianncail position of the corporartes is due to extended deleveraging by businesses and bank non-performing assets being at an all time low.ICRA said credit quality remained strong in H1 FY27, with the credit ratio rising to 3.2x from 2.8x a year earlier and 3.1x in FY26, well above the 10-year average of 1.5x. The annualised upgrade rate moderated to 14% from 17%, but downgrades fell to a multi-year low of 4%; defaults stood at 0.04%, with no investment-grade defaults.“Indian corporates enter H2 FY2027 from a position of strength, supported by healthy balance sheets and substantial liquidity buffers,” said K Ravichandran, executive vice-president and chief rating officer, ICRA. He flagged elevated crude prices, deficient monsoon, inflation and US tariff uncertainty as risks, but said strong balance sheets should prevent broad-based credit stress.Power, real estate, auto components, finance and capital goods, together about half of ICRA’s rated portfolio, contributed around 50% of upgrades. Upgrades mainly reflected stronger businesses and parents, lower project risks, higher scale, improved asset quality and deleveraging.ICRA expects crude prices, a 12% monsoon deficit and weaker reservoir levels to weigh on consumption and agricultural growth. It sees agricultural GVA growth slowing to 1% in FY27 from 3.3%, while retail inflation may average 5% against 2.1% in FY26.
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GDP growth is expected to moderate to 7.1% from 7.8% in Q1. Rural-linked and discretionary sectors may slow, while microfinance collections, vehicle-finance AUM growth and fleet-operator asset quality could weaken.ICRA expects any stress to remain granular, supported by healthy corporate balance sheets, bank asset quality and capitalisation. US tariff uncertainty remains an additional risk, particularly for exporters and generic pharmaceuticals.Corporate leverage is at a decade-low 2.0x, with cash covering nearly half of total debt. Policy support, public investment and spending on infrastructure and clean energy should provide further buffers against external shocks.
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