Ceramics, airlines and polyester textiles among sectors facing sharper profitability pressure in FY27, says Crisil assessment

Crisil has warned that a prolonged West Asia conflict could significantly affect India Inc’s profitability in FY27, despite strong balance sheets expected to cushion wider credit risks. The agency conducted a stress test covering 34 sectors that account for nearly 65 per cent of its rated corporate debt portfolio.

According to the assessment, extended supply-chain disruptions and elevated crude oil prices could reduce corporate operating profitability by nearly 200 basis points from pre-conflict expectations.

Crisil said a prolonged West Asia conflict may place significant pressure on India Inc’s profitability during FY27, even as strong balance sheets are expected to limit broader credit concerns.

The stress test conducted across 34 sectors — representing nearly 65 per cent of Crisil’s rated corporate debt portfolio — estimated that prolonged supply-chain disruptions and higher crude oil prices could reduce corporate operating profitability by almost 200 basis points compared with pre-conflict projections.

Based on the assumption that disruptions continue for nine months in FY27 and crude oil averages $110 per barrel, Crisil said 22 out of the 34 sectors examined could witness operating profitability decline by over 10 per cent because companies may not be able to fully pass on higher costs to consumers immediately.

The report identified ceramics as one of the sectors facing the highest level of impact on both revenue growth and operating margins. Airlines and polyester textiles were also placed in the high-impact category for margin pressure.

Other sectors expected to face moderate impact included auto components, flexible packaging, specialty chemicals, paints, logistics, fertilisers and construction roads & bridges.

Sectors such as edible oil, FMCG, cement, tyres and oil-downstream were assessed as having relatively lower revenue growth impact compared with previous FY27 estimates.

According to the chart, hospitality, residential real estate, gold jewellery and diversified large EPC were categorised under moderate impact levels.

The report also noted sectors expected to benefit from the scenario. Oil-upstream companies were projected to see positive impact from higher realisations, while aluminium could benefit from rising prices and demand-supply imbalances.

Crisil classified credit quality impact into three categories — Neutral/Stable, Moderately negative and Negative — based on revenue impact, operating margin changes and balance sheet strength.