India Inc revenue growth to stay at 13-15% in Q2 despite margin pressure: ICRA
Domestic consumption, festive stocking and commodity realisations are expected to support growth, but operating margins could shrink 100-150 bps amid elevated input costs
India Inc.’s revenue growth is expected to remain healthy at 13-15% in Q2 2026-27, although it is likely to moderate from the 21.3% year-on-year (YoY) expansion recorded in Q1, according to rating agency ICRA. The forecast is based on a sample of 2,756 listed companies, excluding the financial sector.
Domestic consumption, festive-season stocking by trade channels and favourable realisations in select commodity-linked sectors are expected to support revenue growth in the September quarter. However, the unusually strong Q1 performance was aided by value inflation in crude oil, commodities and bullion, as well as a surge in automobile volumes following the GST rate cut.
Input costs to weigh on margins
ICRA expects India Inc.’s aggregate operating profit margin (OPM) to contract by 100-150 basis points YoY in Q2, pressured by higher raw material, fuel, freight and packaging costs. Oil refiners are likely to face continued pressure from petroleum-product under-recoveries and thinner marketing margins, while aviation, automobiles, FMCG and cement could be affected by elevated crude oil, palm oil and coal prices.
Companies across sectors are undertaking price increases to offset higher costs arising from the West Asia conflict and the rupee’s depreciation against the US dollar. Metals and mining, upstream oil, telecom and select utilities are relatively better placed because of favourable realisations, operating leverage and cost pass-through mechanisms.
“ICRA expects sectors such as automobiles, retail, consumer durables, hospitality etc., which rely on domestic consumption, to continue to outperform export-oriented sectors like information technology, apparel/home textiles, cut and polished diamond, etc. Persistent weakness in the global demand environment is likely to affect the performance of export-oriented sectors, while domestic demand remains relatively resilient,” said Jitin Makkar, Senior Vice President & Group Head-Corporate Ratings, ICRA.
Credit metrics remain resilient
Despite margin pressure, the interest coverage ratio is expected to remain resilient at 4.9-5.2 times, broadly around the 5.1 times recorded in Q1, supported by stable earnings and funding costs.
Makkar said, “The corporate earnings cycle in Q2 2026-27 is likely to witness a divergence between healthy revenue growth and constrained operating profit margins, as seen in Q1 2026-27.”
He added that below-normal rainfall could weigh on rural demand, while infrastructure activity may gain traction as weaker monsoon conditions ease rain-related project delays. Hospitality is expected to benefit from domestic demand as outbound travel gets substituted, while exporters remain exposed to weak developed-market demand, trade protectionism and higher freight costs.