New Delhi, April 1 The power sector led rating upgrades in the fiscal year 2025-26 due to improved execution and stable operations, said rating agency ICRA on Wednesday.
The power sector emerged as one of the key drivers of rating upgrades in FY2026, supported by improved project execution, stable operating performance, and strengthening parent profiles, according to the ICRA statement.
The sector witnessed a significant improvement in credit metrics during the year, with its credit ratio rising to 5.2 in FY2026, compared to 3.4 in FY2025 and 2.9 in FY2024, indicating a sustained increase in upgrades relative to downgrades.
This improvement reflects easing project risks, stabilization of operations for commissioned assets, and steady cash flow generation. Rating upgrades in the sector were driven by factors such as project completion, a track record of stable operating performance, and strengthening of parent credit profiles.
The sector also benefited from continued policy support, infrastructure development, and capacity additions, including in the renewable energy segment. Improved financial profiles through deleveraging, equity infusion, and scheduled debt amortization further supported credit quality.
Power was among the sectors that accounted for a meaningful share of rating upgrades during the year, alongside real estate, hotels, auto components, and roads, which together contributed significantly to overall upgrade momentum.
Across sectors, credit ratios remained healthy, with the overall credit ratio improving to 3.1 times in FY2026, compared to 2.0 times in FY2025 and 2.1 times in FY2024, reflecting a broad-based improvement in credit quality.
The overall credit environment remained favorable, with 388 upgrades compared to 124 downgrades, resulting in a strong credit ratio of 3.1 times in FY2026.
Credit quality remained benign, with a low default rate of 0.4 per cent during the year, indicating resilient corporate balance sheets and stable operating conditions across sectors.
Additionally, the power sector has shown consistent improvement in credit ratios over the past few years, indicating sustained strengthening of sector fundamentals and improved risk profiles.
The rating upgrades were supported by improved performance in sectors such as power, real estate, hotels, and roads, driven by healthy demand, easing project risks, and stronger cash flows.
Looking ahead, the sector is expected to benefit from sustained demand, capacity additions, and policy support. However, exposure to global energy price volatility and geopolitical developments remains a key monitorable, it said.
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