Corporate earnings for the June quarter are projected to remain resilient despite challenging conditions, with Nifty 50 profits estimated to grow nearly 10% year-on-year. According to Kotak Institutional Equities, for the BSE Sensex companies, profit growth is likely to be more modest at 5%, with metals and mining, automobiles, non-banking financial companies (NBFCs) and telecom expected to drive overall earnings growth. However, sharp losses at oil marketing companies (OMCs) stemming from inventory and marketing losses will weigh on aggregate numbers. The government has estimated the combined hit to the three state-owned OMCs at around ₹75,000 crore due to the sharp spike in global crude oil prices during the quarter, coupled with limited pass-through to retail fuel prices. As per Motilal Oswal Financial Services, profit after tax across its coverage universe is expected to decline 3% YoY, marking the weakest quarterly earnings performance since September 2020. Excluding OMCs, earnings growth is projected at 14%, indicating that the drag on overall profits is largely coming from one sector.
Oil marketing companies are experiencing a significant turnaround as Brent crude prices have plunged by 35% from $120 in April to around $78 per barrel, substantially improving their earnings outlook. According to Equirus Securities, OMCs have incurred under-recoveries to the tune of ₹2.2 lakh crore on the sale of petrol, diesel and liquefied petroleum gas (LPG) as of June 30. At Brent crude prices below $75 and prevailing refining cracks of about $23 a barrel for petrol and $44 a barrel for diesel, integrated margins are estimated at around ₹26 per litre for petrol and ₹27 per litre for diesel, according to Equirus Securities. These margins are more than double the normalised level of ₹11-12 per litre. Current integrated earnings are estimated at around ₹4 lakh crore annually at this run-rate, compared with normalised earnings of ₹1.8 lakh crore, implying incremental integrated earnings of slightly more than ₹2 lakh crore per year. As per JM Financial, operating profit before depreciation and amortisation (Ebitda) of OMCs from petrol and diesel sales has risen to around ₹19 per litre compared with a historical average of about ₹8 per litre.
Despite profitability challenges, India's blue-chip companies may be on track for their strongest top-line performance in almost three years, with Nifty 50 companies expected to grow about 17% year-on-year in Q1FY27. According to Mint, this growth is driven largely by higher commodity prices, selective price hikes and a favourable base. However, profit growth is expected to edge up to 9% from 7.5% a year ago, with higher crude oil prices inflating input costs and keeping the bottom-line growth subdued. Renewed tensions in West Asia have also clouded the FY27 earnings outlook, raising fears of fresh downgrades should crude oil prices remain elevated. EBITDA margins for the coverage universe are expected to contract 120-172 basis points year-on-year as companies struggle to fully pass on higher raw material and energy costs to customers. The combined net profits of India's top 50 listed companies are expected to grow 8.1% YoY, an improvement from 4.6% in Q4FY26, with profits reaching around ₹2.12 trillion from about ₹1.96 trillion in Q1FY26. Their net sales are expected to grow 17.8% to ₹15.98 trillion in Q1FY27 from ₹13.57 trillion a year earlier.
Building Materials sector is expected to lead with 36% profit growth, followed by Metals at 31%, EMS at 29%, NBFC-Lending at 27%, Retail and Consumer Durables at 27% each, and Technology at 14%. Private and PSU banks are likely to report 10% and 9% YoY growth, respectively, with NBFC-lending companies posting 27% YoY earnings growth. Capital goods and infrastructure are each projected to grow earnings by 10%, while the broader consumer sector is expected to post 6% growth. Motilal Oswal expects its smallcap universe to post 20% YoY PAT growth in Q1, in comparison to earnings declining 2% for largecaps and 14% for midcap companies, largely reflecting the impact of losses in the oil & gas space. According to JM Financial, metals and mining are expected to lead earnings growth with a 35% year-on-year increase, followed by telecom at 21% and IT services at 13%. Private banks are likely to deliver steady earnings growth of around 8%, with BFSI expected to do much of the heavy lifting for the index.
ONGC is likely to be the biggest earnings driver, with 88.6% growth in its standalone net profit, and account for 44.6% of earnings growth of all Nifty 50 companies in the quarter. Bharti Airtel is likely to report a 50.4% YoY jump in its consolidated net profit in Q1FY27 while Hindalco Industries' consolidated net profit is expected to rise 53.6%. These three companies together are expected to account for nearly 77% of incremental growth in net profit of the index companies. In all 10 index companies are likely to report a YoY decline in net profit due to margin contraction owing to high energy and commodity prices. Reliance Industries, with a 27.8% YoY rise, followed by Hindalco Industries (25.6%) and ONGC (45.6%) are seen accounting for a major chunk of the increase in Nifty 50's combined revenue. Together these three companies will account for 41% of incremental growth in the Nifty 50 companies' net sales in the first quarter. According to Nomura's Q1FY27 preview, EBITDA margins for the coverage universe are expected to contract 58 basis points year-on-year to 12.6% as elevated raw material prices continue to pressure profitability.
