Corporate India delivered exceptional Q4FY26 performance with combined net profit surging 25.3% year-on-year, marking the highest growth in at least nine quarters according to The Economic Times. However, this growth was largely driven by improvement in non-operating items such as deferred tax adjustments, while the underlying operating performance faced significant headwinds. The aggregate net profit for a common sample of 2,956 companies grew 25.3% Y-o-Y, compared to revenue growth of 10.8% remaining in low double digits for the second straight quarter. As per The Economic Times, 54% of companies delivered positive earnings surprises, up from 46% in the previous quarter, with earnings coming in ahead of street expectations. In the year-ago quarter, revenue and net profit grew by 7.2% and 15.2% respectively, making the current performance even more impressive.
Despite strong profit growth, operating margins contracted by 170 basis points year-on-year to 17.5%, marking the lowest level in 12 quarters according to The Economic Times. Higher commodity costs during the quarter increased input expenses across sectors, putting pressure on profitability. Shweta Rajani from Anand Rathi Wealth expects this pressure to continue into the April-June quarter, keeping margins under watch. The combined net sales grew 11.4% Y-o-Y to ₹45.65 trillion, representing the fastest pace in the last 12 quarters compared to 6.2% in Q4FY25 and 9.1% in Q3FY26. Industry executives noted that higher prices of milk, wheat and edible oils are squeezing margins, pushing FMCG companies to raise prices and reduce pack sizes.
The recovery remained concentrated in specific sectors, with metals and energy sectors delivering major earnings surprises according to Choice Institutional Equities. Metal companies' profit doubled, helped by a one-off gain reported by JSW Steel, while the power sector reported 29% earnings growth, helped by the deferred tax reversal of NTPC. By contrast, the logistics and transportation sector reported losses, dragged down by net losses at InterGlobe Aviation (IndiGo) due to higher fuel costs and reduction in flights due to the Gulf war. The divergence suggests India Inc's recovery was driven largely by premium consumption, infrastructure spending and businesses with stronger competitive advantages, while traditional sectors faced margin pressures from input cost inflation. Utsav Verma from Choice Institutional Equities noted that majority of the upgrades in earnings for Nifty 50 companies has been observed across energy and metals sectors, driven by the buoyancy in commodity cycle.
For FY27, while the government's focus on infrastructure and GST-driven demand push are key positives, major risks include commodity inflation, weaker rupee and geopolitical uncertainties according to The Economic Times. Rajani expects Nifty earnings to grow by 12% in FY27 from 3% in FY26, with overall earnings growth expected in double digits compared with single-digit increase in the previous year. Verma expects Nifty earnings to grow 15.2% in FY27, with commodity-driven companies performing well due to buoyancy in the commodity cycle. The combined net profit of non-BFSI companies grew 14.2% Y-o-Y to ₹2.98 trillion, with revenue growth led by automobiles, metals & mining, capital goods and consumer durables, while non-cyclical sectors reported slower growth due to higher raw material prices. Rajani maintains a positive outlook, stating that "while commodity inflation and global uncertainties pose risks, the combination of strong economic growth, policy support and an improving earnings cycle provides a positive foundation for FY27".
Industry executives warned that higher prices of milk, wheat and edible oils are squeezing margins, with companies facing challenges in passing on incremental input costs. According to The Economic Times, consumer and manufacturing sectors are likely to have a challenging year due to a probable margin squeeze on account of inability to pass on incremental input costs. The quarter saw interest expenses for BFSI companies up just 3% compared to 7.1% Y-o-Y growth in gross interest income, while non-BFSI companies' interest expenses rose only 3.1% Y-o-Y against 12.8% growth in net sales, contributing to record high PBT margins of 13.6% of total income. Pricing power becomes critical, with B2B companies having genuine technical or engineering advantages typically able to pass on higher input costs and protect margins, while commoditised businesses face far less room to do so.
