Steady GDP growth, likely rate cuts in 2025 to support credit access of corporates in FY26: Fitch Ratings
- IBEF
- January 14, 2025
Fitch Ratings on January 13 projected that India's steady GDP growth outlook, improved banking sector health, and anticipated interest-rate cuts in 2025 would bolster credit access for corporates in FY26. The credit metrics for rated Indian corporates are expected to improve in FY26 with higher EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margins despite high capital expenditure. However, risks could emerge from potential energy price hikes, ongoing geopolitical risks, depreciation of the Indian rupee, or adverse trade protectionism that could affect exports.
Fitch forecasts aggregate sales growth for Fitch-rated corporates to remain subdued at 1-2% in FY26 (FY25 forecast: 1.5%), mainly due to lower oil and gas prices affecting upstream and refining companies. However, other sectors may experience varying growth. The credit rating agency expects India’s GDP to grow by 6.5% and robust infrastructure spending to drive demand for cement, steel, electricity, petroleum products, and engineering and construction (E&C) sectors. Sales in oil and gas production and oil marketing companies (OMCs) will likely decline due to lower prices, although moderate volume growth is expected. IT services companies are projected to see mid-single-digit growth as clients curtail discretionary spending. Auto suppliers may experience slower growth due to reduced volume in the domestic market and weaker exports. Demand recovery in travel and tourism will continue at a moderate pace. At the same time, the telecom and pharmaceutical sectors will benefit from tariff hikes and non-discretionary demand, respectively.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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