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Fitch Ratings: ‘Indian earnings likely to improve in FY27, but US tariff cloud remains’

Higher revenues and improved earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins are expected to offset the high capital expenditure of the companies covered by Fitch Ratings, its analysts said in a note.

Written by: Akash Mandal

3 min readMumbaiJan 21, 2026 03:56 AM IST

‘Better earnings expected in FY27; US tariff cloud remains’

The financial performance of Indian corporates is expected to improve in FY27, with their credit metrics seen relatively stable, according to ratings agency Fitch Ratings.

Writing in a note on Tuesday, Fitch analysts said that higher revenues and improved earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins are expected to offset the high capital expenditure of the companies it rates. However, certain potential concerns remain, especially from US tariffs and the weakening of the rupee against the US dollar.

“We expect aggregate revenue for Fitch-rated corporates to rise by 6% in FY27 (FY26 estimate: -1%), driven by steady GDP growth and an improved consumer-spending outlook following a comprehensive reduction in GST rates,” Fitch said, adding that it sees the EBITDA margin of these companies to improve to around 16% next year from its estimate of 15.3% for 2025-26, aided by strong demand, higher pricing, lower input costs, a better mix of products, and even cost-saving initiatives in some cases.

EBITDA indicates the operational health of a company.

Fitch also expects the median EBITDA net leverage of companies under its coverage to remain relatively steady at 3.2x. This metric shows how many years a company will take to repay its debt using just its EBITDA, which is 3.2 years in this case. The stability is due to growth in EBITDA offsetting the negative cash flows of companies due to high capital expenditure in many sectors.

“We expect eased funding access to support corporates’ funding needs in FY27 even as they continue optimising their funding mix, in light of the banking sector’s healthy balance sheets and reduced interest rates,” Fitch said. The Reserve Bank of India cut the policy repo rate by 125 basis points to 5.25% in 2025.

However, the US tariffs and the rupee’s weakness remain a worry. Fitch said Indian companies generally have low direct exposure to the current US tariffs. Unaffected sectors, however, including pharmaceuticals, could be hit by further tariff announcements, the rating agency added. “The risk of second-order effects could also rise if further levies are imposed. Downside risks could materialise if a sharp depreciation of the Indian rupee affects some of the exposed issuers,” the report stated.

Capital outflows from Indian financial markets and a widening merchandise trade deficit have hurt the Indian rupee over the last year or so, with the rupee falling past the 90- and 91-per-dollar marks last month. After staging a recovery of sorts in recent weeks, partly driven by the RBI’s intervention in the foreign exchange market, the rupee on Tuesday breached 91-per-dollar before closing at 90.97 to the dollar.