India Inc's credit quality remained resilient in the first half of FY27 despite global tensions and supply chain issues. Crisil Ratings said, "These strengths, operational adaptability and robust balance sheets, have been reinforced by strong domestic demand." Upgrades outpaced downgrades as companies used healthy balance sheets to manage rising costs.
India Inc's credit quality remained resilient in the first half of FY27 despite prolonged geopolitical tensions, supply chain disruptions, volatile energy prices and inflationary pressures, as reflected in the credit metrics released by major rating agencies.
However, Crisil Ratings, ICRA, CareEdge Ratings and India Ratings & Research (Ind-Ra) cautioned that escalating tensions in West Asia, higher crude oil prices, deficient monsoon rainfall and global trade uncertainties could pressure corporate credit profiles in the second half of the fiscal year.
Crisil Ratings' credit ratio, measuring upgrades relative to downgrades, improved to 2.18 times in H1FY27 from 1.50 times in H2FY26. The agency recorded 464 upgrades against 213 downgrades, with infrastructure-linked sectors accounting for nearly 40 per cent of upgrades. Downgrades were concentrated in ceramics and polyester textiles.
Reaffirmation rate
Its reaffirmation rate remained steady at around 81 per cent, highlighting the resilience of corporate credit quality despite geopolitical uncertainty. The upgrade rate of 13 per cent was marginally above the decadal average of 11 per cent, while the downgrade rate of 6 per cent was in line with long-term trends.
According to Crisil, Indian corporates have mitigated the impact of the seven-month-long West Asia conflict by diversifying sourcing channels, reworking logistics networks and selectively passing on higher costs. Combined with healthy balance sheets, reflected in a median debt-to-equity ratio of around 0.5 times, this has helped contain broader credit stress.
Subodh Rai, Managing Director, Crisil Ratings, said, "These strengths, operational adaptability and robust balance sheets, have been reinforced by strong domestic demand, recovering exports and targeted policy support, such as Emergency Credit Line Guarantee Scheme 5.0. Together, they have enabled companies to partially, and in some cases fully, pass on cost increases and manage cash flow pressures."
ICRA's credit ratio stood at 3.2 times in H1FY27, unchanged from the previous half and well above its decade average of 1.5 times. While the annualised upgrade rate moderated to 14 per cent from 17 per cent in FY26, the annualised downgrade rate fell to a multi-year low of 4 per cent.
"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.
Domestic drive
CareEdge Ratings reported the strongest improvement, with its credit ratio rising to 3.95 times from 1.93 times in H2FY26. The agency recorded 300 upgrades against 76 downgrades.
"The domestic economy, meanwhile, delivered a stronger-than-expected performance despite global headwinds. Buoyant consumption, a pickup in investment, a healthy external position and India Inc's leaner balance sheets give us confidence in the resilience of the Indian economy looking ahead in fiscal 2027," added Sachin Gupta, Executive Director and Chief Rating Officer, CareEdge Ratings.
Ind-Ra said corporate credit profiles remained strong for the sixth consecutive year despite the energy shock triggered by the West Asia conflict. In H1FY27, it upgraded 190 issuers and downgraded 63, resulting in an upgrade-to-downgrade ratio of 3.0 times.
While rating agencies expect stronger balance sheets to buffer companies from immediate stress, they remain watchful of rising commodity prices, inflation, weather-related disruptions and global trade risks in the second half of FY27.