The Indian corporate sector demonstrated exceptional credit quality in H1FY27, with credit ratios improving across rating agencies despite a persistently uncertain global environment. According to reports from CareEdge Ratings, the credit ratio nearly doubled to 3.95 times in H1FY27 from 1.93 times in H2FY26, with 300 rating upgrades against just 76 downgrades during the period. As per CareEdge, the upgrade rate rose to 16% in H1FY27 from 13% in H2FY26, remaining above the 10-year average of 15%, while the downgrade rate fell to just 4% from 7%, reaching an all-time low. The improvement was driven by stronger balance sheets, lower leverage, and healthy liquidity that provided adequate buffers to companies. As per ICRA, the credit ratio stood at 3.2x in H1FY27, compared with 2.8x in H1FY26 and 3.1x in FY2026, which was well above its 10-year average of 1.5x. According to CareEdge's Sachin Gupta, Executive Director and Chief Rating Officer, the improvement comes at a time when the external environment has become considerably more challenging, with geopolitical tensions keeping global energy prices high and contributing to inflationary pressures across major economies. However, rating agencies noted that rating upgrades moderated in the first half of the financial year as companies faced multiple headwinds including the West Asia conflict, rising crude oil prices, higher input costs and evolving US tariff measures.
CareEdge reported 464 upgrades and 213 downgrades during H1FY27, with around 81 per cent of ratings reaffirmed. As reported by Business Standard, nearly 40 per cent of upgrades came from infrastructure and allied sectors, including roads, renewables, capital goods and secondary steel, supported by government-led infrastructure spending. Downgrades were concentrated in ceramics and polyester textiles, reflecting supply-chain disruptions, softer export demand and competition from Chinese imports. According to ICRA, the annualised upgrade rate moderated to 14% from 17% in FY2026, while the annualised downgrade rate declined to a multi-year low of 4%. Upgrades were driven by entity-specific factors including stronger business profiles, improved parent credit profiles, lower project risks and deleveraging through equity infusion and scheduled debt repayments. Ind-Ra also reported 190 upgrades and 63 downgrades during H1FY27, maintaining a stable upgrade-to-downgrade ratio of 3, with upgrades broadly distributed across sectors while downgrades were concentrated in areas sensitive to raw material prices and execution risks. Rating agencies cautioned that the number of downgrades is also lower but this typically does not reflect where issuers do not cooperate with any adverse rating.
Power, real estate, auto components, finance and capital goods sectors together contributed around 50% to all upgrades, accounting for around half of ICRA's rated portfolio. Power-sector upgrades were concentrated in renewables, reflecting lower execution risks, improved operating performance, amended debt structures, increased scale and stronger parent profiles. Real estate upgrades were supported by higher occupancy, lower leasing execution risk, healthy residential sales and collections, and stronger parent profiles. Auto component upgrades benefited from sustained demand, improved operating leverage and an improved value-added sales mix. Capital goods upgrades reflected growth in scale and order books amid healthy demand from defence, power and data centres, while financial-sector upgrades were supported by ownership changes and improvements in scale, asset quality and capitalisation. The manufacturing and services sector credit ratio improved to 2.84 times in H1FY27, up from 2.06 times in H2FY26, with upgrades driven by resilient domestic demand across consumer-linked sectors and infrastructure-led demand. Despite moderation in rating activity, rating firms said India Inc's credit profile remains resilient, supported by stronger balance sheets, lower leverage and liquidity buffers.
The infrastructure sector recorded the sharpest improvement among major sectors, with its credit ratio increasing to 8.31 times in H1FY27 from 1.67 times in H2FY26. According to CareEdge Ratings, part of this increase was driven by a large portfolio-level rating action, wherein a change in the credit profile of a single large group resulted in upgrades across multiple linked entities. Even after adjusting for this action, the infrastructure credit ratio remained strong at around 5 times. Project commissioning continued to support upgrades, particularly across Hybrid Annuity Model (HAM) road projects and renewable power, with timely payments from most state distribution utilities supporting faster-than-anticipated deleveraging for power producers and transmission infrastructure providers. However, downgrades were primarily driven by deterioration in capital structures of certain renewable energy sponsor holding companies amid rising non-project debt and operational underperformance. Rating agencies noted that project commissioning continued to support upgrades, particularly across HAM road projects and renewable power.
The Banking, Financial Services, and Insurance (BFSI) sector also recorded a material improvement, with its credit ratio rising to 5.40 times from 2.25 times in H2FY26. This was mainly due to higher upgrades and fewer downgrades. According to CareEdge Ratings, asset quality and funding have remained stable across banks, NBFCs and HFCs, with M&A, equity infusions, and improvements in scale, profitability, and asset quality driving upgrades. Secured segments such as mortgages, gold loans, loan against property and vehicle finance remain healthy, while banks are well capitalised with net NPAs at historically low levels. However, downgrades were concentrated in smaller, MFI-heavy NBFCs facing elevated credit costs and funding pressures. The sector outlook remains stable, supported by resilient domestic demand and improving credit metrics. Rating agencies expect corporates to absorb up to 50 basis points rate hike without much of a problem, indicating the sector's resilience.
Corporate India has fundamentally strengthened over the past decade, with significant improvements in key financial metrics. Between 2016 and 2026, overall gearing nearly halved from 1.04 times to 0.50 times, while PBILDT margins expanded from 10% to 14%, and interest coverage sustainably increased from 4.10 times to 7.59 times. Healthier balance sheets and stronger profitability have improved India Inc's ability to absorb external shocks and navigate periods of uncertainty. Despite challenges from elevated crude oil prices, deficient monsoon rainfall and rising inflation, Indian corporates enter H2 FY2027 from a position of strength, supported by substantial liquidity buffers and resilient domestic demand. The West Asia conflict proved to be one of the most significant tests of corporate credit profiles since the pandemic, but corporate credit profiles continued to show resilience through H1FY27, with downward rating actions attributable to the conflict confined to a handful of issuers. However, rating agencies including Crisil, ICRA, CareEdge, and Ind-Ra have 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.
