India Inc Records Resilient Q1 FY27 Performance Despite Rising Cost Pressures

Listed non-financial companies recorded 21.2% growth in net sales, while operating profit growth moderated to 6.2% amid higher input and operating costs.

India Inc recorded a resilient start to FY27 despite continued global geopolitical uncertainty and cost pressures. An analysis of 2,347 listed non-financial companies shows that net sales increased 21.2% year-on-year in Q1 FY27, accelerating from 12.3% in Q4 FY26.

Consumer-oriented sectors including automobiles, FMCG and retailing benefited from steady demand and GST rate rationalisation, while higher commodity prices supported sales growth in sectors such as crude oil and metals. However, rising input and operating costs moderated aggregate operating profit growth to 6.2%, compared with 13.7% in the previous quarter.

Net Sales Growth Accelerates in Q1 FY27

Aggregate net sales of non-financial companies increased to Rs 41.0 trillion in Q1 FY27 from Rs 39.4 trillion in Q4 FY26. On a year-on-year basis, sales growth accelerated to 21.2%, compared with 12.3% in the previous quarter.

Consumer-focused sectors such as automobiles, FMCG, retailing and white goods recorded healthy sales growth. Together, these sectors account for about 18% of total sales in the non-financial company sample.

Higher commodity prices also supported sales growth in commodity-driven sectors, including crude oil and non-ferrous metals.

Input Costs Weigh on Operating Profit

Despite the strong topline performance, aggregate operating profit growth moderated to 6.2% in Q1 FY27, compared with 13.7% in Q4 FY26.

The crude oil sector, comprising petrochemicals, refineries and oil exploration, was the main drag on profitability. Excluding crude oil, operating profit growth stood at 18.8% in Q1 FY27, up from 12.1% in the previous quarter.

Total expenditure increased 23.7% year-on-year in Q1 FY27, compared with 12.3% in Q4 FY26. The cost of services and raw materials rose 38%, compared with 11.7% in the previous quarter.

Geopolitical headwinds continued to affect commodity, freight and logistics costs. Brent crude oil prices surged by nearly 52% year-on-year in Q1 FY27. The Bloomberg Industrial Metals Sub-index increased by about 12% from end-March to early June before moderating thereafter.

Employee costs also increased by 11.9% in Q1 FY27, compared with 10.7% in Q4 FY26.

The operating profit margin consequently declined to 15.7% from 17.8% in Q4 FY26 and remained below the previous thirteen-quarter average of 17.3%. The interest coverage ratio also eased to 6.5 from 7.2.

Textile Sector Records Improved Performance

Among the 20 sectors analysed, 11 recorded growth above 10% in both net sales and operating profit. These included automobiles, retailing, white goods, non-ferrous metals, iron & steel, capital goods, chemicals, logistics, IT, realty and telecom.

The textile sector showed improvement, with net sales growth increasing to 8.1% in Q1 FY27 from 2.8% in Q4 FY26. Operating profit growth also rose to 26.4%.

The report notes that encouraging domestic demand and an improving export scenario contributed to the improved performance of the textile sector.

Other sectoral trends included:

• Automobiles & ancillaries: Net sales growth of 22.4%, compared with 18.4% in Q4 FY26.
• Retailing: Net sales growth of 42.8%, compared with 46.2%.
• White goods: Net sales growth of 18.9%, compared with 4.7%.
• FMCG: Net sales growth accelerated to 21.7% from 15.1%, while operating profit growth moderated to 3.1% from 10.5%.
• Non-ferrous metals: Net sales growth increased to 38.9% from 25.3%.
• Iron & steel: Net sales growth rose to 14.4% from 12.9%.
• Crude oil: Net sales growth accelerated to 29.4% from 5.6%, although profitability weakened due to higher crude costs and weak fuel marketing margins.
• Cement & construction materials: Operating profit contracted 3.2% due to elevated fuel and raw material costs.
• Aviation: Rising fuel costs and disruptions linked to the West Asia crisis affected profitability.

Employee Costs Continue to Rise

Employee costs across the sample increased 11.9% in Q1 FY27, compared with 10.7% in Q4 FY26.

Six sectors — IT, automobiles & ancillaries, pharmaceuticals & drugs, infrastructure, iron & steel and capital goods — accounted for 70% of total employee costs in the sample.

IT represented the largest share at 34.1%, with employee costs rising 11.3% to Rs 1,07,025 crore. However, the hiring environment remained subdued. Employee headcount across the top five IT firms declined 0.4% year-on-year in Q1 FY27, marking a second consecutive quarter of contraction.

Employee cost growth across selected sectors included 16.3% in automobiles & ancillaries, 16.9% in pharmaceuticals & drugs, 10.7% in infrastructure, 9.8% in iron & steel and 13.5% in capital goods.

Outlook for India Inc

India Inc’s Q1 FY27 performance remained resilient despite an uncertain global geopolitical environment. However, rising input costs and inflationary pressures could continue to affect profitability.

The report identifies overall monsoon performance and its impact on rural demand as important factors ahead. Companies’ ability to pass on higher input costs while protecting margins will remain critical.

Persistent geopolitical tensions could also keep energy prices volatile and increase logistics and freight costs. The outlook remains cautiously optimistic, with upcoming earnings growth expected to depend on domestic demand and companies’ ability to manage global economic challenges.