Tuesday, August 19, 2025
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Fitch Flags US Tariff Risks for Indian Firms

Mumbai

Fitch Ratings has warned that while Indian companies face limited immediate exposure to the latest US tariff hikes, risks are growing across key sectors, particularly pharmaceuticals, chemicals, and oil. The agency said a US-India trade agreement would be critical in offsetting potential damage.

From August 7, the US imposed a 25% “reciprocal” tariff on Indian goods, followed by another 25% levy on products tied to Russian oil imports from August 27. Although India’s direct automotive exports to the US remain small, Fitch noted that the broader auto sector outlook has weakened. Samvardhana Motherson International Ltd (SAMIL), which generates 20% of its sales from the US and Mexico, may see limited upside. Fitch revised its outlook on SAMIL to Stable from Positive in May due to tariff uncertainty.

The US continues to be a vital market for Indian pharma. Biocon Biologics earns about 40% of revenues from the US, with manufacturing bases in India and Malaysia. Fitch cautioned that any fresh tariff on pharma would strain Biocon’s profitability and its ability to absorb costs. Similarly, crop-protection firm UPL Ltd, which gets 10–12% of revenues from the US, could lose competitiveness if tariffs reduce its price advantage over Chinese rivals, though its diverse portfolio should support growth.

In the oil sector, Indian OMCs—IOC, BPCL, and HPCL—source 30–40% of crude from Russia. While discounts have boosted earnings, restrictions could cut OMC EBITDA by nearly 10%. State-backed companies may withstand the hit, but HPCL-Mittal Energy remains more vulnerable.

Fitch expects minimal direct impact on IT, construction, telecom, cement, and utilities. However, prolonged tariff pressures could slow India’s FY26 GDP growth to below its 6.5% forecast and indirectly weigh on corporate performance.

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