Large Corporates Managed Geopolitical Shocks In Q1 As MSMEs Continue To Suffer
To protect against a demand slowdown, consumer-oriented LCs are increasingly adopting premiumisation-led strategies, while infra-focused firms are managing sluggish tendering activity through increased specialisation.
Chennai: While large corporates have managed geopolitical shocks in Q1 FY27 with healthy balance sheets and shift towards premiumization, credit health and uneven consumption and uncertain demand is a matter of concern for MSMEs, finds 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,” finds Abhishek Bhattacharya, Head - Large Corporate Ratings, Ind-Ra. Capex momentum also is picking up gradually.
Export-focused large corporates in sectors such as chemicals and textiles have navigated tariff shocks and war impact ably so far using strategies around diversification and modularisation of capex to improve capacity utilisation.
To protect against a demand slowdown, consumer-oriented LCs are increasingly adopting premiumisation-led strategies, while infra-focused firms are managing sluggish tendering activity through increased specialisation.
The Q1 FY27 financial performance of large corporates benefited from inventory gains and some strategic price hikes. Ind-Ra has revised its outlook on the textile sector to neutral from deteriorating, while maintaining a neutral outlook on chemicals.
However, elevated input and freight costs pose risks to 2HFY27 margins amid the sluggish demand outlook. Heightened competition and sluggish tendering activity have kept pricing and margins under pressure in infra-led sectors such as engineering, procurement & construction.
When it comes to MSMEs, credit health is a matter of concern. Corporates operating at the lower end of the spectrum in sectors such as auto ancillaries, realty, and durables continue to struggle.
Consumption demand is uneven, with premiumisation play driving momentum in auto, residential realty, durables, retailing, and healthcare sectors. Uncertain demand and increasing divergence with MSMEs remain as overhang. Pockets within chemicals, fertilisers, and construction materials are likely to see some stress.
Government support to MSMEs and policy incentives for broader consumption demand pickup would be key monitorables in the second half of the year.
