India Inc.’s corporate credit profile remained strong for the fifth consecutive year in FY26, supported by favourable macroeconomic conditions and domestic policy measures, according to a report by India Ratings and Research (Ind-Ra). 

The agency said tariff-related disruptions during the year were largely manageable and impacted only a limited number of export-oriented entities. During FY26, Ind-Ra upgraded 361 issuers, accounting for 19% of the reviewed portfolio while 115 issuers (6%) were downgraded. The upgrade-to-downgrade (U/D) ratio stood at 3.1, marginally lower than 3.5 in FY25. 

Defaults edged up slightly to 0.8% in FY26 from 0.6% a year earlier. Debt-weighted rating affirmations improved to 94% while downgrades declined to 1% from 2% in the previous year. 

“Corporate India’s FY26 performance reflects resilience driven by policy reforms and post-pandemic recovery,” said Arvind Rao. He said that deleveraging over the past few years, soft global commodity prices, strong domestic consumption, and sustained government infrastructure spending supported credit health. 

Rao added that structural measures such as income-tax cuts, GST rationalisation, and 125 basis points of rate cuts by the Reserve Bank of India, along with a favourable monsoon, boosted demand and lifted FY26 GDP growth estimates to 7.6% from an earlier projection of 6.3%. Despite elevated US tariffs, the impact on rated entities remained limited. 

Risks emerge from West Asia conflict 

However, Ind-Ra flagged emerging risks from the ongoing West Asia conflict, which could disrupt India’s energy supply rather than just prices. While FY26 credit profiles did not reflect stress from the conflict, as it escalated late in the fiscal, the agency cautioned that FY27 could test corporate balance sheets, particularly for lower-rated firms. 

“Higher-rated entities (A category and above) are likely to remain resilient, but BBB and lower-rated corporates may face challenges,” Rao said. 

Suparna Banerji said higher-rated corporates continued to exhibit strong credit metrics, with a U/D ratio of 4.4, although lower than 9.9 in FY25 due to a rise in downgrades to around 4%. BBB and below-rated entities maintained a U/D ratio of 2.3. 

Infrastructure companies were the largest contributors to rating upgrades, accounting for nearly one-third of the total, driven by sustained capital expenditure, improved execution, and stronger cash flow visibility. Large corporates also saw continued credit improvement while mid-sized firms showed signs of stress amid market volatility, with their U/D ratio falling to 1.9. 

Key sectors which are impacted

Across sectors, renewable energy and road infrastructure maintained strong upgrade momentum while construction, capital goods, and financial institutions also saw positive rating actions. Consumption-driven sectors such as commercial real estate, automobiles, consumer services, and healthcare benefited from robust demand and higher disposable incomes. 

On the downside, downgrades were concentrated in sectors exposed to volatile raw material prices, including FMCG, auto dealerships, and construction materials. The chemicals sector also remained under pressure due to weak realisations, rising imports, and subdued export demand. 

Ind-Ra said while FY26 reflected sustained credit strength, the evolving global environment, including geopolitical tensions and energy risks, could pose challenges in the coming year, particularly for weaker-rated corporates.