Strong revenue growth fails to shield India Inc margins in March quarter

AI Summary

India Inc saw strong revenue growth in the March 2026 quarter, driven by robust sector performance despite margin pressures from rising input costs and currency depreciation amid the Iran-Israel conflict. Challenges ahead include input inflation, weak monsoon, and gas shortages impacting fertiliser availability.

ET Intelligence group: Corporate India's performance in the March 2026 quarter at the sector level was a mixed bag, affected by the input cost inflation and depreciating rupee amid the Iran-Israel conflict that began in late February. While top line growth was strong, driven by upbeat volume growth and realisations, operating margins were under pressure due to higher input costs. Rising cost inflation, expected weak monsoon, and gas shortage that may affect the availability of fertilisers are key factors that are likely to put pressure on India Inc's performance in the coming quarters.AutomobilesHits: Maruti Suzuki India achieved the highest ever quarterly sales volume crossing 6.7 lakh units that helped revenue hit ₹52,463 crore for the first time. M&M, too, reported the highest ever quarterly revenue of ₹54,982 crore, driven by robust growth in automotive and farm segments.Misses: M&M reported year-on-year margin pressure in the tractor segment while Tata Motors faced high operating costs. Maruti's net profit declined despite record revenue amid higher costs and mark-to-market losses on investments.Outlook: For M&M, the automotive segment is likely to sustain volume momentum while the farm equipment business volume may moderate due to high year-ago base and monsoon related issues. Companies are likely to reel under input cost inflation in the near term.Revenue change (YoY): 29.6%Net profit change (YoY): 27.8%BankingHits: The sector reported double-digit credit growth amid multi-year low asset quality. State Bank of India reported a record low gross NPA ratio of 1.5% compared with around 5% five years ago. PSU banks continued to report record annual net profitsMisses: Net interest margin (NIM) stayed under pressure amid liquidity squeeze. Mark-to-market losses due to the regulatory intervention in the forex market and lower treasury income dragged overall profits.Outlook: Challenges in attracting deposits will keep cost of borrowings high while inflationary pressure in the economy raises the possibility of higher interest rates, which may in turn affect the current growth momentum in credit offtake.Revenue change (YoY): 3.8%Net profit change (YoY): 11.4%CementHits: Ultratech Cement reported strong revenue growth and margin expansion, driven by sustained construction activities, higher realisation and improved operating leverage.Misses: Higher input cost inflation affected profitability of Ambuja Cements during the quarter as its Ebitda margin shrank by over 650 basis points to 13.4% year-on-year.Outlook: Sales volume is expected to moderate to mid-single-digit in FY27 compared with high-single-digit growth in FY26 amid the prediction of a weak monsoon season and rising input costs. Companies will keenly follow cost optimisation to protect margins. Unabated capacity addition may affect pricing power if demand fails to recover after the monsoon period.Revenue change (YoY): 9.4%Net profit change (YoY): 16.6%ConsumerHits: HUL's volume growth bounced back to 6%, the level last seen three years ago. Marico improved Ebitda growth guidance to high teens from earlier projection of mid-teens growth. Nestle reported double digit revenue and profit growth, driven by strong volumes.Misses: Margins contracted amid higher prices of crude oil and its derivatives. ITC's standalone operating margin fell to 50% from 61% year-on-year, affected by higher taxes on cigarettes.Outlook: Rising fuel prices and expectations of a weaker monsoon may affect revenue growth and operating margins in the next two-three quarters. Focus on selling premium products will increase further in response to input cost pressure.Revenue change (YoY): 11.2%Net profit change (YoY): 43.7%Oil and gasHits: Oil marketing companies including Indian Oil Corporation and Hindustan Petroleum Corporation reported multi quarter high net profits aided by low cost inventory. Upstream oil producer Oil India clocked nine-quarter high revenue and net profit amid elevated crude prices.Misses: The oil-to-chemicals (O2C) division's margin of RIL fell to a nine-quarter low of 7.9%. Bharat Petroleum Corporation reported lower year-on-year profit due to asset impairment charges.Outlook: The LPG under-recoveries have surged six-seven times from March 2026 levels, affected by the impact of the West Asian crisis on gas availability. If the situation persists, the financials of oil marketing companies will be under pressure.Revenue change (YoY): 7.0%Net profit change (YoY): 20.5%PharmaHits: Domestic market reported double-digit year-on-year growth, driven by better pricing and volumes. Sun Pharma reported double digit revenue and profit growth.Misses: US generics and contract manufacturing business faced pricing pressure during the quarter. Sun Pharma's operating margin was under pressure due to higher investments. Dr. Reddy's Labs and Cipla reported a sharp fall in net profit due to weaker US sales.Outlook: Sun Pharma's revenue growth is expected to moderate in FY27 amid lower