ICRA today said corporate sector is set for a healthy revenue growth to the tune of 8-10% YoY in Q3, FY2026, on the back of buoyancy seen during the festivals as well as GST reduction on a slew of items. The rating agency also pointed out that operating profit margin will show improvement amid expectations of an upbeat demand as commodity prices soften on a YoY basis.

“Rating agency ICRA expects India Inc. to sustain healthy YoY revenue growth of 8-10% in Q3 FY2026 (vis-à-vis 9.2% YoY in Q2 FY2026), led by firm rural demand and expectations of a revival in urban demand,” the agency said in a release today.  

“Coupled with the softening input costs like crude oil and coal, ICRA projects an improvement in the operating profit margin (OPM) by 50-100 bps on a YoY basis. As a result, the credit metrics of India Inc. in Q3, FY2026, are likely to marginally improve with interest coverage ratio at 5.3-5.5 times, against 5.0 times in Q2 FY2026,” it added.

Kinjal Shah, Senior Vice President & Co-Group Head – Corporate Ratings, ICRA Limited, said domestic rural demand remains resilient and tailwinds like GST rate rationalisation, income tax relief announced during the Union Budget 2025, 100 bps interest rate cut by the Reserve Bank of India between February 2025 and November 2025 (leading to lower borrowing costs) and easing food inflation are expected to boost urban consumption.

“That said, the ongoing geopolitical tensions and steep US tariffs continue to impact demand sentiments, especially for export-oriented sectors such as agro-chemicals, textiles, auto and auto components, seafoods, cut and polished diamonds, and IT services,” Shah added.

ICRA analysed the performance of 2,966 listed companies (excluding financial sector entities) in Q2 FY2026 revealing 9.2% YoY revenue growth, led by healthy demand in consumption-oriented sectors like retail, hotels and auto, and infrastructure-oriented sectors like capital goods and cement, the agency pointed out.

“A seasonal slowdown in demand in the oil & gas, airlines and power sector and deferment of purchases in the consumer durables and FMCG sector amid expectations of a GST rate rationalisation, however, led to a lower revenue growth of 2.5% on a sequential basis. IT services companies faced growth challenges in constant currency terms, owing to cautious spending by US clients amid global uncertainties,” it added.  

The agency said an unusually prolonged monsoon this year dampened the year-on-year revenue growth across several sectors during the quarter. “Companies selling air conditioners, beer and value-added dairy products saw muted demand as the shorter summer curtailed consumption. Further, agrochemical companies faced reduced offtake because of fewer spraying opportunities, while even hospitals in certain regions reported cancellations of planned surgeries, underscoring the widespread impact of the extended rains,” it added.

“With regard to the US tariff impact, auto component exporters saw a decline in volume offtake from the US auto original equipment manufacturers in Q2, FY2026, as tariffs constrained production and sales in the US market, even as Indian exporters largely avoided tariff-induced pricing pressures,” it said. The agency said that in contrast, textile exporters—both home textiles as well as apparels—chose to defend market share by partially absorbing the tariff hike impact, which resulted in margin compression.