ICRA sees India Inc credit profile steady in Q2FY26, US tariffs weigh

India Inc's credit profile is set to remain stable in Q2FY26 with improved margins and ICR, but US tariffs and global tensions could delay the private capex recovery

Indian listed corporates are expected to maintain a steady credit profile in the quarter ending September 2025, with an improvement in the interest coverage ratio (ICR) and resilient operating profit margins (Q2FY26), rating agency ICRA said.

 

The credit matrix is likely to remain stable with ICR at 4.9–5.1 times in Q2FY26, compared with 4.9 times in Q1FY26. ICR would benefit from festive season demand impulses and greater transmission of policy rate cuts to borrowing rates. The Reserve Bank of India has reduced the policy rate by 100 basis points since February 2025.

 

The assessment for Q2FY26 is based on the performance of 585 listed companies, excluding financial sector entities.

   

The rating agency said operating profit margins (OPM) will show resilience as commodity prices soften and are expected to be in the range of 18–18.2 per cent on a year-on-year basis in Q2FY26. Corporate India reported a steady OPM of 18.1 per cent in Q1FY26. Margin expansion in sectors such as telecom, cement, and real estate was driven by improved demand and operating leverage. However, this was partly offset by a contraction in the auto, consumer durables, and metals and mining sectors due to lower realisations or higher input prices, it added.

 

ICRA expects corporates to report modest year-on-year revenue growth of 5–6 per cent in Q2FY26 (5.5 per cent in Q1FY26), led by firm rural demand and structural factors such as premiumisation and the expanding scale and scope of organised players.

 

While domestic rural demand remains resilient, urban demand is yet to recover meaningfully. Despite tailwinds like income tax relief and easing food inflation, recovery in sentiment would be key to an urban revival. In that context, the expected Goods and Services Tax (GST) rate cuts could provide some stimulus to demand, said Kinjal Shah, Co-Group Head – Corporate Ratings, ICRA.

 

Ongoing geopolitical tensions and steep US tariffs continue to impact demand sentiment, especially for export-oriented sectors such as agro-chemicals, textiles, automobiles and auto components, seafood, cut and polished diamonds, and IT services.

 

Given the uncertain global environment, the private capex cycle may get further delayed. However, sectors such as electronics, semiconductors, and niche segments within the automotive space like electric vehicles will continue to see a scale-up in investments. Further, government capital expenditure is expected to support overall investment activity, although the headroom for growth is likely to be lower in later quarters of this year, after the upfronting seen in Q1FY26, the agency said.