Corporate India began FY27 on a firm footing, with strong revenue growth in the April-June quarter masking early signs of pressure on profitability as rising input costs and a sluggish global environment tempered earnings momentum.
Data for a sample of 155 companies, including banks, financial services and insurers, showed aggregate net sales rose 17.4% year-on-year, while net profit increased 15%, with domestic-facing sectors such as banking, telecom and industrials offsetting a gradual recovery in export-oriented businesses.
Data showed aggregate net sales rose to Rs 10.68 lakh crore from Rs 9.09 lakh crore a year earlier, while operating profit increased 16.3% and net profit climbed 15%. Operating margin, however, slipped 27 basis points to 26.85%, indicating companies found it harder to convert higher revenues into earnings as costs rose. Total expenditure increased 17.9%, marginally outpacing sales growth, while profit before tax grew 13.4%. Other income declined 7.5%, further limiting bottom-line expansion.
The earnings reported so far broadly reflect this trend. Private sector banks remained the biggest contributors, supported by improving credit growth, benign asset quality and sharply lower provisioning. ICICI Bank emerged as the standout, combining robust loan growth with stable margins, while HDFC Bank, Axis Bank and Kotak Mahindra Bank also delivered healthy profit growth despite continued pressure on funding costs. The results suggest loan demand has strengthened, although margin expansion is becoming increasingly difficult as competition for deposits remains intense.
Technology companies presented a more mixed picture. TCS, HCLTech, Wipro, LTM and LTTS reported improving conversations around artificial intelligence and digital transformation, but discretionary spending remained subdued, particularly in developed markets. While deal pipelines improved and management commentary turned more constructive, companies stopped short of signalling a broad-based recovery in technology spending, with hiring remaining measured.
Reliance Industries once again demonstrated the strength of its diversified business model, with telecom and retail cushioning the cyclicality in oil-to-chemicals, while JSW Steel pointed to improving profitability amid resilient domestic demand and a more favourable raw material environment.
Even so, the broader data showed raw material costs as a share of sales increased sharply during the quarter, underlining that cost pressures have not entirely eased across Corporate India.
The data also points to continued balance-sheet discipline. Employee expenses rose 8.1%, well below revenue growth, while finance costs increased just 3.7%, suggesting leverage remains manageable despite elevated interest rates. With only the first set of large companies having reported, the earnings season indicates domestic-facing sectors continue to underpin Corporate India’s growth, while export-oriented businesses are recovering at a slower pace.
