India’s corporate earnings cycle began FY27 on a stronger-than-expected note, with aggregate revenues of 838 listed companies growing 22% year-on-year in Q1, according to rating agency ICRA. This growth marks a sharp increase from the 13% YoY revenue growth reported in Q4 of FY26.

The revenue rise was driven by commodity and bullion price-led value inflation, sustained auto demand following prior GST rate cuts, and resilient consumption volumes, despite concerns surrounding El Niño and geopolitical flare-ups in West Asia.

However, headline aggregate operating profit margins contracted by over 200 basis points YoY in Q1 FY27, leaving net profits overall flattish. ICRA noted this was largely due to the oil-refining sector, where elevated crude prices and under-recoveries on petroleum products and LPG hurt profitability. Excluding the oil and gas sector, operating profit margins held stable at 19%, while net profits grew by over 20% YoY.

Key highlights from ICRA's Q1 FY27 report include:

• Auto OEMs vs. FMCG: Passenger vehicle OEMs achieved revenue growth exceeding 25% in Q1, but EBITDA margins contracted by 200 bps as firms absorbed higher raw material, freight, energy, and labor costs. FMCG and electronics manufacturers passed most cost increases to consumers to preserve margins.
• Soft Spots & Sector Drag: IT services recorded subdued constant-currency growth amid cautious global spending. Cement, sugar, textiles, and auto components also lagged in revenue growth.
• Forex & Credit Profiles: Sharp depreciation of the Indian rupee against the US dollar caused forex losses due to elevated import costs and ineffective hedges. Nevertheless, around two-thirds of the 116 sectors sampled showed an improved interest coverage ratio compared to Q1 2025-26.
• Capital Expenditure: Government capital expenditure rose 24% YoY to Rs. 3.4 trillion in Q1, reaching 28% of its full-year budgeted target with spending focused on defence, railways, and capital transfers. Private capex remained selective, concentrating on data centres, electric mobility, and defence.

Jitin Makkar, Senior Vice President and Group Head of Corporate Ratings at ICRA, noted that despite initial concerns regarding demand and cost shocks, the ultimate impact on earnings was limited. He added that comfortable credit metrics and healthy corporate balance sheets provide a cushion against potential near-term external shocks and volatility.