Fitch Warns of Rising US Tariff Risks for Indian Corporates Across Auto, Pharma, and Energy Sectors

Fitch Ratings has sounded the alarm on increasing risks faced by Indian corporates due to impending US tariffs, highlighting potential impacts across various sectors including automotive, pharmaceuticals, and energy.

Automotive Sector Impact

Samvardhana Motherson International, a key player in the automotive sector, is facing significant exposure to the new tariffs. With the United States accounting for nearly 20.00% of its sales, the company's outlook has been revised by Fitch to 'Stable' from 'Positive', indicating the gravity of the situation.

Pharmaceuticals Under Pressure

The pharmaceuticals sector is also bracing for impact. Biocon Biologics, a major player in the industry, generates approximately 40.00% of its sales from the US market. The company faces a challenging scenario with limited ability to pass on higher costs due to competitive pressures in the market.

Crop Protection Chemicals at Risk

UPL Ltd, operating in the crop protection chemicals sector, derives 10.00%-12.00% of its revenue from US customers. The company could face competitive challenges as tariffs on Indian products move closer to those imposed on Chinese goods.

Oil Marketing Companies Face Uncertainty

Oil marketing companies (OMCs) are particularly vulnerable to the new tariffs, especially concerning Russian crude imports. Russian crude currently accounts for 30.00%-40.00% of crude imports for Indian OMCs. Fitch estimates that a complete halt could potentially hurt their EBITDA by about 10.00%.

While state-owned OMCs are expected to maintain their credit ratings due to government support, HPCL-Mittal Energy is noted to have a lower rating buffer and higher vulnerability to these changes.

Tariff Details and Timeline

The US is set to impose a 25.00% reciprocal tariff on India starting August 7, 2025. Additionally, another 25.00% levy on Russian oil imports will take effect from August 27 of the same year.

Minimal Impact on IT and Domestic Sectors

Fitch expects minimal direct impact on IT services and domestic sectors such as cement, telecoms, and utilities. However, the ratings agency warns that sustained higher US tariffs could pose a moderate downside risk to India's projected 6.50% economic growth for the financial year 2026.

Outlook

The implementation of these tariffs presents a complex challenge for Indian corporates across various sectors. Companies with significant exposure to the US market or reliance on Russian oil imports will need to strategize to mitigate potential financial impacts. As the situation develops, it will be crucial for affected businesses to closely monitor policy changes and adapt their operations accordingly to maintain their competitive edge in the global market.