India Inc revenue growth to moderate to 13-15 pc in Q2; margins to contract: Report

Mumbai: India Inc's revenue growth will contract to 13-15 per cent in the ongoing September quarter from the 21.3 per cent level in April-June, a domestic rating agency said on Thursday.

From a profitability perspective, the operating profit margin is set to compress by over 1 percentage point, Icra Ratings said.

Its group head for corporate ratings, Jitin Makkar, said sectors like automobiles, retail, consumer durables, and hospitality are relying on domestic consumption to post better revenue growth than export-linked ones like information technology, apparel/home textiles, and cut and polished diamonds.


Read more: India Inc’s revenue growth to moderate to 13-15% in Q2 FY27; margins under pressure: ICRA

"Persistent weakness in the global demand environment is likely to affect the performance of export-oriented sectors, while domestic demand remains relatively resilient," Makkar said.

The below-normal monsoon outlook for August-September will lead to risks of lower agricultural output and rural consumption, along with hardening of food inflation in Q2, he said, adding that the same could weigh on the revenue growth and margins of rural-focused and agri-based sectors.

India Inc's aggregate operating profit margin (OPM) will continue to face headwinds from elevated raw material, fuel, freight and packaging costs, and may compress by 1-1.5 per cent in Q2 when compared to the year-ago period, the agency noted.

Read more: India Inc’s equity fundraising surges past Rs 1.11 lakh crore on strong inflows in July-August

"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 FY27," Makkar said.

Oil refining companies would continue to face margin pressure in Q2 due to underrecoveries from petroleum products and thinner marketing margins, it said, adding that aviation, automobiles, fast-moving consumer goods (FMCG), cement and other energy-intensive sectors are likely to face pressure from elevated prices of crude oil and its derivatives, palm oil, coal, etc and the consequent rise in freight and packaging material costs.

However, most of these sectors are undertaking pricing actions to pass on the increased costs induced by the West Asia conflict and depreciation of the rupee against the US dollar, it added.

Metals and mining companies, upstream oil producers, telecom operators and select utilities are relatively better placed on the margins front, supported by favourable realisations, operating leverage or costpass-through mechanisms, the agency said.

Despite pressures on margins, India Inc's credit metrics are likely to remain resilient, it clarified.