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

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.