Indian companies delivered exceptional financial performance in Q1 2026-27, with combined net sales of 3,589 companies growing 19.4% year-on-year to ₹47.27 trillion, according to The Economic Times. This represents the strongest revenue growth in at least nine quarters, significantly outpacing the 6% growth in Q1FY26 and 11.8% in Q4FY26. The strong performance was driven by auto, banking, metals, and pharma sectors, which together accounted for 66% of overall corporate profit growth compared to 39% in Q1FY26. Adjusted net profit rose 11% YoY to ₹4.58 trillion from ₹3.95 trillion a year earlier, with 49% of companies exceeding estimates and 22% reporting misses at the net profit level. About 49% of companies exceeded estimates, while 22% reported a miss at the net profit level, with the upgrade-to-downgrade ratio turning favourable to 1.5x, the highest in at least 21 quarters.
Despite strong revenue growth, companies reported significant margin contraction as higher commodity and energy prices pushed up input costs during the quarter. The operating profit margin (EBITDA) of companies excluding BFSI firms declined by nearly 200 basis points YoY to 16.9% of total income in Q1FY27, from 18.9% in Q1FY26, marking the lowest operating margin for these companies in 13 quarters. Adjusted net profit margin declined by nearly 50 basis points YoY to 7.4% of overall revenue, from 7.9% in Q1FY26. The combined expenditure on raw materials and power and fuel of non-BFSI companies rose 29.5% YoY, outstripping the 21.2% growth in net sales, which was the fastest since the December 2022 quarter. Companies excluding BFSI reported adjusted net profit growth of 12.7% YoY to ₹2.79 trillion, marking the slowest growth in four quarters. Excluding banking and finance companies, the sample's raw material costs relative to revenue increased to 38% -- the highest in at least 13 quarters -- from 33.6% a year ago, with the quarterly range during the past three years being 33-35%.
Banks, non-bank lenders, and mining and metal companies were the biggest earnings drivers, together accounting for 66% of overall corporate profit growth in Q1FY27. Mining and metal companies topped the earnings growth chart, with their combined net profit rising 45% YoY, followed by finance companies with 28% growth and banks recording 20.3% growth. The combined net profit of these three sectors rose 26.6% YoY to ₹1.99 trillion. In contrast, oil and gas sector companies were among the biggest laggards, with their combined adjusted net profit declining 22.6% YoY to ₹38,650 crore, though their revenues recorded high double-digit growth aided by elevated oil and gas prices amid West Asia conflict. BPCL, IOC, and InterGlobe Aviation reported quarterly losses, while Tata Motors Passenger Vehicles and ITC saw adjusted net profits decline 69.5% and 22.2% YoY, respectively. Hindalco contributed the most to corporate earnings growth, with adjusted net profit rising 116.7% YoY to ₹8,677 crore, aided by sharp rise in global aluminium prices following supply disruptions caused by the US-Israel war on Iran. Banking and finance, capital goods, healthcare, retail and jewellery companies reported strong performance, while automobiles, cement, consumer goods, and oil and gas reported pressure on profits and profitability.
Small and midcap companies demonstrated exceptional earnings performance, significantly outpacing large-cap growth. Nifty 50 and Nifty 100 delivered EPS (earnings per share) growth of 11.0% and 8.3%, respectively, while the Midcap 150 and Smallcap 250 reported significantly stronger growth of 34.0% and 36.4% in that order, according to Anand Rathi Wealth. For a common sample of 3,589 companies, revenue and net profit grew in double digits for the third and fourth consecutive quarter respectively. Excluding oil and gas companies, the sample's net profit growth improved to 20.9% for the June quarter, while excluding the lending sector, the sample's net profit growth shrank to 5.4% due to poor performance by the oil and gas sector. The strong performance of sectors including financials and capital markets suggests continued strength in credit growth, asset quality and market activity, as noted by Anand Rathi Wealth.
Looking ahead, revenue momentum is anticipated to gain further support from festivals and wedding season, and focus on product premiumisation strategies, according to Geojit Investments. Around two-thirds of the 116 sectors in ICRA's sample set reported an improvement in their interest coverage ratio in Q1 2026-27 vis-à-vis Q1 2025-26, indicating improving credit profiles. However, sharp depreciation of rupee against the US dollar posed challenges for several entities reporting forex losses due to increased import costs and ineffective hedges. India Inc's balance sheets remain comfortable with improving credit profiles. For the remainder of the current fiscal year, analysts expect around 13% EPS growth in large caps and a stronger growth of 18-20% for midcaps and smallcaps, with continued strength in credit growth, infrastructure spending and capex activity supporting earnings momentum.
