Revenue Growth, Margin Gains to Support Indian Cos Credit Metrics in 2026-27: Fitch

Credit metrics of rated Indian corporates are expected to remain stable in the fiscal year 2026-27 as higher revenues and improving EBITDA margins offset elevated capital expenditure, supported by steady economic growth, stronger consumer demand and easing cost pressures, Fitch Ratings said.

Fitch expects aggregate revenue for its rated Indian corporate portfolio to grow about 6% in 2026-27, a sharp turnaround from an estimated 1% contraction in 2025-26. The improvement is underpinned by steady GDP growth and a more favourable consumer-spending environment, following a comprehensive reduction in goods and services tax rates. Lower indirect taxes are expected to support discretionary consumption and volumes across consumer-facing sectors, while also easing pricing pressures in certain segments.

Operating profitability is also set to improve. Fitch projects aggregate EBITDA margins of rated corporates to rise to around 16% in 2026-27, compared with an estimated 15.3% in 2025-26. Margin expansion is expected to be driven by a combination of strong demand conditions, selective pricing gains and moderation in key input costs. In addition, several corporates are benefiting from a better product mix, operational efficiencies and cost-saving initiatives implemented over the past few years.

Despite these positives, Fitch notes that capital expenditure intensity remains high. Corporates across sectors such as power, infrastructure, metals, cement and telecommunications continue to pursue expansion and capacity-addition plans to capture medium-term growth opportunities. While these investments are expected to support future earnings, they will also keep free cash flows under pressure and limit near-term deleveraging.

As a result, leverage metrics are likely to remain largely stable rather than improve meaningfully. Fitch expects most rated issuers to maintain credit metrics within current rating sensitivities, supported by adequate access to funding and stable refinancing conditions. The agency also highlights that strong domestic liquidity and a relatively diversified funding mix, including bank loans and capital markets, continue to underpin financial flexibility for large corporates.

Sectoral trends are expected to diverge. Consumer-oriented companies are likely to see the most visible benefits from GST reductions and improved household spending, while infrastructure-linked sectors will remain influenced by government spending and project execution timelines. Manufacturing and export-oriented companies could face some volatility from global demand conditions, although lower raw material costs and efficiency gains may provide partial insulation.

Fitch adds that disciplined financial policies will remain important in sustaining credit quality. Companies with aggressive expansion plans or weaker pricing power could face pressure on metrics if demand slows or costs rise unexpectedly. However, the agency does not expect a broad-based deterioration in credit profiles, given the generally conservative balance sheets built after years of deleveraging.