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What’s Shielding Indian Companies From U.S. Tariffs? Fitch Has the Answers

Swarnadwip Nath Published Aug 01, 2025, 11:00 AM Updated Sep 17, 2026, 07:12 PM

Fitch Ratings has projected a positive outlook for Indian corporates in FY26, citing improved credit metrics driven by stronger EBITDA margins and resilient financial buffers. Despite global trade tensions and higher U.S. tariffs, the agency expects only limited direct impact on India Inc., thank...

The findings were published in Fitch’s latest commentary titled “India Corporates Credit Trends: July 2025,” offering a sector-wide snapshot of performance expectations and risk assessments.

Key Highlights from Fitch’s July 2025 Report

- EBITDA margins for rated Indian corporates expected to rise to 16 percent in FY26 (up from 14 percent in FY25)

- Median EBITDA net leverage forecast to decline to 3.1x from 3.6x

- Aggregate revenue projected to fall by 3 percent, led by oil and gas sector contraction

- High capex intensity to persist, but offset by margin gains and cost efficiencies

- U.S. tariff hikes pose limited direct risk due to low-to-moderate export exposure

EBITDA Margins and Leverage: Signs of Financial Strength

Fitch anticipates that wider EBITDA margins will help Indian corporates absorb high capital expenditure and maintain healthy credit profiles. The improvement is attributed to:

- Lower input costs across key sectors

- Cost-saving initiatives and operational streamlining

- Better product mix and pricing discipline

These factors are expected to reduce leverage and support rating headroom, even as free cash flows remain negative in capex-heavy industries.

Revenue Outlook: Sectoral Divergence Ahead

While overall revenue is forecast to decline by 3 percent in FY26, the drop is largely concentrated in oil and gas production, refining, and marketing companies. This is due to:

- Lower global energy prices

- Excess supply and subdued demand

- Volume growth unable to offset pricing pressure

Other sectors such as cement, steel, electricity, and engineering are expected to benefit from infrastructure spending and steady domestic demand. IT services and auto suppliers may see mid-single-digit growth, while chemicals and travel remain under pressure from global oversupply and discretionary spending cuts.

Tariff Impact: Contained but Not Dismissed

Fitch believes that the recent increase in U.S. tariffs will have limited direct impact on Indian corporates, citing:

- Low-to-moderate exposure to U.S. exports among rated entities

- Strong domestic demand cushioning external shocks

- Risks of supply diversion and weaker global growth remain, but are manageable

The agency warns that downside risks could emerge if energy prices spike, the rupee weakens significantly, or protectionist measures escalate further.

Funding and Liquidity: Supportive Conditions Ahead

Indian corporates are expected to benefit from favorable funding conditions in FY26, including:

- Adequate cash buffers across most rated entities

- Softening onshore bond yields

- Improved banking sector health

- Likely interest rate cuts amid steady GDP growth

These factors are likely to support refinancing needs and capital expenditure plans without straining balance sheets.

Conclusion: Resilience Amid Global Uncertainty

Fitch’s July 2025 outlook paints a cautiously optimistic picture for Indian corporates. While sectoral challenges persist and global risks loom, the combination of margin expansion, strategic cost control, and supportive funding conditions positions India Inc. for a stable FY26.

The report underscores the importance of agility and financial discipline as companies navigate a complex macroeconomic landscape.

Source: Fitch Ratings

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