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Informist, Friday, Mar. 13, 2026

 

NEW DELHI – Indian companies are expected to continue posting earnings growth despite a potential margin pressure in some sectors due to higher oil prices, S&P Global Ratings said in a report Friday. Strong balance sheets of companies alongside their domestic focus provides a cushion against higher oil prices and potential supply-chain disruptions arising out of the war in West Asia, the credit rating agency said about the companies rated by it.

 

"Strong balance sheets of rated Indian companies together with adequate onshore liquidity mitigate downside risks in our base case scenario that the conflict will be short-lived," S&P Global said, adding while there a high degree of unpredictability regarding the overall duration of the war, it estimates the most intense part will last two to four weeks. 

 

According to S&P Global, the single-biggest impact of the war on Indian companies would be in the form of oil prices. Higher prices could hamper profitability of refining and downstream industries such as petrochemicals and fertilizers. Further, there could be supply-related issues in the event the conflict endures. Among other sectors which could see a pressure on profitability include metals and mining, airlines, and sectors that see sizable exports to West Asia such as jewellery and certain food and beverage producers. Meanwhile, rated utilities companies, which are mostly coal-based, are better positioned as they benefit from regulated returns, the credit rating agency said.

 

The report recounts a similar scenario from 2022 when a rise in energy prices resulted in lower margins for a range of industries such as refining, petrochemicals, steel, and aluminum, but failed to inflict a material impact on credit quality. Indian corporates have also historically reflected high resilience to currency weakness, it added.

 

S&P Global, however, warned that low levels of strategic stockpiles in India for its energy needs poses a risk to its economy and a sustained disruption could have implications for the broader economy apart from affecting certain sectors directly.  

 

S&P Global does not anticipate any impact on oil and gas companies rated by it. Its rating on Indian Oil Corp. Ltd. is closely linked to that of the BBB rated sovereign bonds with a stable outlook and for Reliance Industries Ltd., it said the rating reflects benefits from diversified earnings, largely through the telecom business. Meanwhile, Oil and Natural Gas Corp. Ltd. and Vedanta Resources Ltd. should benefit from higher oil and metal prices, respectively, according to the credit rating agency. "Our rating on ONGC is, however, capped by our sovereign rating on India. Our rating on Vedanta reflects improving earnings, with an upgrade contingent on the sustainability of stronger cash flow in relation to debt," it said.

 

OTHER FACTORS

S&P Global expects capital expenditure among the India corporates rated by it to increase to about $70 billion in 2026-27 (Apr-Mar), up 8% from the roughly $65 billion in FY26. "Much of the increase is driven by infrastructure companies (power generation, transmission, airports). However, we note a rise in capex in sectors such as steel, refining, cement, and auto," it said.

 

On the changes in the US trade policy, the rating agency said sectors such as gems, jewellery, textiles, machinery, and auto components, which have high exposure to the US, face challenges. However, it added that these sectors should see some relief with the reduction in US tariffs to 10% from 50% previously. A strong domestic growth outlook has also limited the risk of overcapacity, according to the report.

 

S&P Global sees a mixed impact from India's trade agreement with the European Union. The deal opens market access to sectors such as textiles, generic pharmaceuticals, chemicals, footwear, and engineering goods, and the benefits could also extend to the IT sector, as per the rating agency. Meanwhile, it could increase competition in sectors such as automobiles, branded pharma, precision machinery, dairy, and wines and spirits on the flip side.

 

In the IT services sector, S&P Global fears Indian IT service companies could be affected as investments tied to artifical intelligence move towards automation of many lower-end services globally. Further, an increase in research and product development of AI capabilities could add to pressure on margins over the next two years, it said, however, adding that the pressure on margins or higher investments will have little immediate impact on ratings.  End

 

US$1 = INR 92.40

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Shakshi Jain

Edited by Vandana Hingorani

 

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