2 hrs ago
Large Corporates Weather Shocks as MSMEs Face Growing Strain
India Ratings studied how companies performed during the first quarter of FY27.
It said many large companies handled geopolitical problems relatively well.
They used strong finances, careful production plans and higher-priced products to protect their businesses.
Some export companies also changed where and how they invested to manage tariffs and war-related effects.
However, higher material and transport costs could hurt profits later in the year.
Smaller businesses, called MSMEs, are facing more difficult credit conditions.
Demand is strong in some premium products but weak or uncertain in other parts of the economy.
The government’s support for MSMEs and policies that encourage wider consumer spending will be important.
India Ratings says large corporates managed Q1 FY27 geopolitical shocks with healthy balance sheets.
Export-focused chemicals and textile companies used diversification and modularised capital spending to handle tariff and war-related impacts.
Premiumisation supported demand in sectors including autos, residential realty, durables, retailing and healthcare.
Higher input and freight costs, weak demand and competition could pressure margins in the second half of FY27.
MSMEs, particularly in auto ancillaries, realty and durables, continue to face credit-health concerns and uncertain demand.
- Who
- Large corporates and MSMEs, as assessed by India Ratings and Research, including views from Abhishek Bhattacharya.
- What
- Large corporates managed geopolitical shocks in Q1 FY27, while many MSMEs continued to face credit, demand and margin pressures.
- Where
- The report was issued from Chennai and covers Indian corporate sectors.
- When
- The assessment covers Q1 FY27 and risks expected during the second half of FY27.
- Why
- Large companies benefited from healthy balance sheets, premiumisation and strategic measures, while MSMEs faced uneven consumption, uncertain demand and credit concerns.
Large Corporates
MSMEs and Weaker Sectors
Ability to absorb shocks
Large Corporates
Large corporates have generally managed geopolitical shocks through healthy balance sheets, tactical capacity use and business specialisation.
MSMEs and Weaker Sectors
MSMEs and companies at the lower end of sectors such as auto ancillaries, realty and durables continue to struggle with credit health.
Demand strategy
Large Corporates
Consumer-focused large companies are using premiumisation to protect demand, while infrastructure firms are increasing specialisation.
MSMEs and Weaker Sectors
Consumption remains uneven, and uncertain demand is creating a widening gap between stronger large companies and MSMEs.
Outlook
Large Corporates
Capex momentum is gradually recovering, and textile companies have received a revised neutral outlook.
MSMEs and Weaker Sectors
Higher input and freight costs, sluggish tendering, competition and weak demand could create further stress, including in parts of chemicals, fertilisers and construction materials.
Key facts
- Large-corporate position
- Most large corporates managed geopolitical shocks with healthy balance sheets, tactical capacity use and premiumisation or specialisation strategies.
- Export-focused sectors
- Chemicals and textiles companies used diversification and modularisation of capital spending to improve capacity utilisation.
- Sector outlook
- India Ratings revised textiles to a neutral outlook from deteriorating and maintained a neutral outlook on chemicals.
- Profit risks
- Elevated input and freight costs could pressure margins in the second half of FY27.
- Infrastructure pressure
- Engineering, procurement and construction businesses faced pricing and margin pressure from competition and sluggish tendering.
- MSME concerns
- MSMEs in auto ancillaries, realty and durables continued to struggle with credit health and uncertain demand.
- Policy monitorables
- Government support for MSMEs and incentives to broaden consumption demand are key issues for the second half of the year.
Quotes
Abhishek Bhattacharya
Head of Large Corporate Ratings at India Ratings
“Most large corporates have managed geopolitical shocks well with healthy balance sheets, tactical usage of capacity, and shift towards premiumisation and specialisation plays”
deccanchronicle.com
Sources
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