India Inc profit margins expected to improve

New Delhi

India’s top companies are likely to see better profit margins in the April–June quarter of FY2026, says a new report by rating agency ICRA. The report estimates that operating profit margins for India Inc. may rise to 18.2%–18.5%, thanks to a steady recovery over the last few quarters and lower interest costs.

The Reserve Bank of India (RBI) has cut repo rates by 100 basis points recently. This is expected to reduce loan costs and raise the interest coverage ratio of companies to 5.1–5.2 times in Q1 FY2026, up from 5.0 times in the previous quarter.

ICRA’s senior vice president, Kinjal Shah, said private investments may remain cautious due to global uncertainty. However, fast-growing sectors like electronics, electric vehicles, and semiconductors will continue to attract investment. Companies linked to Indian Railways and Defence are also expected to benefit from strong order books.

In Q4 FY2025, ICRA studied 589 listed firms (excluding banks and financials). These companies showed a 7.6% rise in revenue year-on-year, led by sectors such as consumer goods, retail, airlines, and real estate. However, industries like steel saw lower earnings due to weak global demand and cheaper Chinese imports.

India Inc. is likely to continue steady revenue growth in Q1 FY2026. While rural demand remains strong, urban demand is recovering, helped by tax cuts, falling food prices, and lower EMIs.

Still, geopolitical tensions may affect sectors dependent on exports—like agro-chemicals, IT, auto parts, textiles, and diamonds. Overall, companies are benefiting from better demand, moderate costs, and stable debt levels, making FY2026 look promising so far.