More Stories

Informist, Tuesday, Jun. 2, 2026

NEW DELHI – The continuing geopolitical crisis in West Asia is expected to have a significant negative impact on the revenue and profitability of domestic micro, small, and medium enterprises in the financial year 2026-27 (Apr-Mar), according to a report released by Crisil Intelligence Tuesday. The revenue growth of these enterprises is expected to decline by 100 basis points on year to 7.5-8.5% and the earnings before interest, tax, depreciation, and amortisation margin is likely to decline by 50-100 bps to 5–5.5%, according to the report.

The half-yearly report covers 69 sectors and 147 clusters, which represent an aggregate revenue of INR 75 trillion, or 20-25% of India's GDP and two-thirds of the domestic micro, small, and medium enterprises.

Amid the COVID-19 pandemic, the revenues of micro, small, and medium enterprises had declined 3-5% in the financial year 2019-20 (Apr-Mar) and FY21, Crisil said. Their EBITDA margin had declined 80 basis points to 4.7% in FY21. The West Asia crisis is following a similar pattern, with small businesses bearing a disproportionate burden, it said in the report.

Micro, small, and medium enterprises face dual challenges this time--production cuts and revenue losses due to reduced availability of raw material, and margin compression stemming from trade disruptions and limited pricing power to pass on increasing commodity and energy costs, as per the report. It put micro, small, and medium enterprises into three categories: those dependent on energy-related raw materials such as gas, those reliant on energy-linked derivatives, and those vulnerable to trade disruptions. The units heavily reliant on energy inputs, particularly those in clusters with limited access to gas or lower ability to switch to alternative fuels, will be hit the hardest, Crisil said.

In the Morbi cluster in Gujarat, the micro, small, and medium enterprises that generate over 85% of the cluster's ceramic sector revenue will see revenue growth plummet to 1-3% in FY27 from 9-11% in FY26. Their EBITDA margin is expected to decline by 300-400 bps to 4-6% in 2027, according to the report. This is largely because the production is orientated towards exports, with as much as 80-90% of output meant to sent abroad, with 20-25% of exports directed to West Asia, as per the report. The Morbi cluster accounts for over 80% of India's ceramic tile production and 80-85% of its output is dependent on supply of gas.

In Firozabad, Uttar Pradesh, the glass sector has seen a 40% reduction in production, with micro, small, and medium enterprises likely to experience only 1-3% revenue growth, as per the report.

The chemical sector, which imports more than 90% of its key inputs, such as methanol, from West Asia, has seen raw material prices surge by 1.2–1.4 times with only partial pass-on. Thus, chemical micro, small, and medium enterprises in Vadodara, Gujarat, are expected to witness a margin decline of 150–250 bps to 3-5% in FY27, Crisil Intelligence Director Pushan Sharma said in the report. He added that micro, small, and medium enterprises in Ahmedabad manufacturing dyes and pigments are facing a similar situation. "The input costs have jumped 1.3-1.5 times, with only partial pass-through happening, squeezing margins by 150-250 bps on-year to 3-5% in FY27," he was quoted as saying. "In Surat's textile sector, raw material costs, particularly for polyester yarn and fibre, which are crude (oil) derivatives, have surged, further squeezing already thin margins." 

The micro, small, and medium enterprises affected by trade disruptions, however, will experience a moderate impact, as per the report. In the pharmaceuticals sector, smaller firms could face a margin decline of 100-200 bps to 5-7% in FY27 due to the shortage of raw material such as active pharmaceutical ingredients, according to Elizabeth Master, associate director, Crisil Intelligence. 

Micro, small, and medium enterprises in the gems and jewellery sector which account for more than 80% of diamond exports, with over a quarter exported to West Asia, could see a decline in EBITDA margin of 100-150 bps as buyers are seeking a 5-10% price cut amid subdued sentiment, Master said.

The rising price of diesel is likely to affect micro, small, and medium enterprises in sectors such as road construction, where fuel accounts for 8-10% of the total cost, as per the report. Crisil expects the margin of such companies to decline 50-100 bps to 8-10% in FY27. The EBITDA margin of micro, small, and medium enterprises in the packaged foods sector is expected to also decline by 50-100 bps to 6-6.5% in FY27, due to rise in packaging costs, according to the report.  End

Reported by Astha Oriel

Edited by Rajeev Pai

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2026. All rights reserved.