Steady Growth Ahead for Indian Firms in Q1 FY26
Strong Local Demand Boosts Revenue
Indian firms are likely to see steady revenue growth in the April-June quarter of the current financial year. This growth is driven by strong local demand, as per a report by ICRA.
Main Points
- Steady revenue growth expected in Q1 FY26
- Strong local demand fuels growth
- Operating profit margins to stay steady
- Railway and defence sectors to see notable growth
Upcoming Challenges
However, ongoing global tensions might impact sentiment, especially for export-driven sectors. ICRA predicts that operating profit margins for Q1 FY26 will remain steady at 18.2-18.5%. This continues the trend of gradual recovery seen in recent quarters.
Better Profitability
Better profitability is also backed by a drop in interest costs. This follows cumulative repo rate cuts of 100 basis points. Consequently, India Inc’s interest coverage ratio is expected to improve.
Investment Patterns
“Given the uncertain global environment, ICRA expects the private capital expenditure cycle to remain measured,” said Kinjal Shah, Senior Vice President at ICRA. “Certain sunrise sectors such as electronics, semiconductors, and niche segments within the automotive space like electric vehicles will continue to see a scale-up in investments.”
Growth in Specific Sectors
Shah also mentioned that firms linked to the Indian Railways and defence sectors are set for significant revenue and earnings growth. This growth is expected as their strengthened order books begin to translate into revenues and earnings.
Factors Driving Local Demand
ICRA noted that rural demand is likely to remain strong. Urban consumption is expected to bounce back, helped by recent income tax cuts and a decrease in food inflation.
Sectors Focused on Exports
Despite this positive outlook, ICRA warned that export-oriented sectors may face continued pressure. These sectors include agrochemicals, textiles, auto components, polished diamonds, and IT services. The pressure is due to weak global sentiment fueled by ongoing geopolitical instability.
