Corporate credit profile resilient in FY26 with higher rating upgrades: ICRA

New Delhi: Corporate credit profiles remained resilient in 2025-26, with rating upgrades significantly outpacing downgrades, reflecting healthy balance sheets, steady domestic demand, and continued policy support, ICRA said on Wednesday.

During FY26, ICRA upgraded 388 entities compared to 124 downgrades, resulting in a strong credit ratio of 3.1 times, a notable improvement from 2 times in FY25 and 2.1 times in FY24.

The overall credit quality remained benign, supported by stable operating performance across sectors and sustained infrastructure-led growth, it said, adding power, real estate, hotels, auto components and road sectors accounted for a significant share of rating upgrades.


However, pockets of stress persisted in segments such as microfinance and select chemical players, contributing to some downgrades, ICRA said.

ICRA Executive Vice President & Chief Rating Officer K Ravichandran said the alleviation of US tariff-related risks and the signing of the India-EU trade agreement had significantly reduced external headwinds.

Also, GST rate cuts, income tax relief, easing inflation and transmission of policy rate cuts strengthened the outlook for Indian corporates entering 2026-27.

"However, the escalation of hostilities in West Asia since late February 2026 has reintroduced risks, particularly for India's energy and food security. A prolonged conflict or disruption of the Strait of Hormuz could constrain the supply of oil, gas and fertilisers, triggering global supply shocks.

"While higher subsidies could cushion commodity price pressure, they may strain government finances. Moreover, corporates could face a moderation in demand and pressure on margins amid rising inflation," Ravichandran said.

ICRA expects domestic demand and government-led infrastructure spending to remain key growth drivers for Indian corporates.

However, evolving geopolitical developments, particularly in West Asia, along with global trade uncertainties, will remain key monitorables for credit quality in FY2027, it added.

Global crude prices have risen by almost 50 per cent since the United States and Israel launched military strikes against Iran on February 28, triggering sweeping retaliation from Tehran.

ICRA expects GDP growth to moderate to moderate to 6.5 per cent in current fiscal, from 7.5 per cent in the 2025-26 fiscal. Retail inflation is estimated to rise to 4.3 per cent in FY27, from 2.1 per cent in FY26.

It said the macro outlook for FY27 is contingent on the duration of the West Asia crisis. ICRA has factored in average crude oil price at USD 85/barrel in FY27 in base case.