High Energy Costs To Pressure Near-Term Credit Of Indian Firms: Moody's

(MENAFN- KNN India) New Delhi, May 26 (KNN) Despite robust balance sheets and favourable long-term growth prospects, Indian corporates face near-term credit pressure from elevated energy prices and geopolitical uncertainty, Moody's Ratings said on Monday, while its Indian affiliate ICRA revised the outlook to negative for several key sectors.

Energy Costs the Primary Concern

Moody's acknowledged that Indian corporates are currently better placed than in previous cycles to absorb external shocks, supported by deleveraging, healthy liquidity, and supportive policy frameworks, PTI reported.

However, the ratings agency warned that persistently high energy prices and structural shifts in key service industries could test credit resilience over the coming quarters.

"Elevated energy prices weigh on near-term credit conditions for Indian corporates, despite strong fundamentals," it stated.

India's heavy dependence on imported crude oil, liquefied natural gas, and petroleum products exposes corporates to higher input costs, currency volatility, and supply chain disruptions, Moody's noted.

Moody's Ratings Managing Director Vikash Halan said, "State-owned oil marketing companies and downstream fuel retailers face acute margin pressure as elevated costs are only partially passed through to consumers, while fuel-intensive sectors such as cement, chemicals, fertilisers and aviation are seeing rising cost burdens," as quoted by PTI.

ICRA Turns Negative on Select Sectors

Moody's India affiliate ICRA has revised its outlook to negative for aviation, fertilisers, and the refining and marketing segment within oil and gas, citing heightened geopolitical risks from Middle East tensions and evolving trade tariff developments with the United States as the primary drivers shaping the corporate operating environment in FY2026–27.

Not all sectors are under pressure, however. ICRA maintained a positive outlook for capital goods and defence, supported by sustained improvement in order books, and for healthcare, where demand for medical treatments and preventive services continues to grow.

Monsoon Risk Adds a Further Layer of Uncertainty

Weather-related risks present an additional concern. El Niño-like conditions could disrupt monsoon patterns, weighing on rural incomes and discretionary spending.

ICRA's Executive Vice President and Chief Ratings Officer K. Ravichandran said, "While government support measures and minimum support price interventions could partially mitigate income risks, a weaker agricultural outcome could temper rural discretionary consumption.”

"Accordingly, there could be downward pressure on demand in sectors like tractors, two-wheelers, FMCGs and construction materials linked to rural housing," Ravichandran added.

(KNN Bureau)

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