Indian cos record fastest quarterly growth in two years as strong demand counters rising costs: Crisil

Indian companies are projected to have delivered their strongest quarterly revenue growth in nearly two years during the first (April-June) quarter of FY2026-27, demonstrating the resilience of domestic demand despite mounting cost pressures arising from geopolitical tensions in West Asia. According to the latest Crisil Intelligence report, aggregate corporate revenues are estimated to have grown by 11-11.5 percent year-on-year during the quarter under consideration, driven by a combination of robust consumer demand and companies' ability to pass on higher input costs through selective price increases.

The performance comes at a time when global businesses continue to grapple with supply chain uncertainties and elevated commodity prices following the conflict in West Asia, which disrupted energy markets and increased logistics expenses. While rising crude oil prices and freight costs squeezed corporate margins across several sectors, strong domestic consumption helped many companies maintain healthy top-line growth.



Growth drivers
The report indicates that the latest quarter marks a significant shift in the drivers of corporate revenue growth. Over the past two years, higher sales volumes had been the primary engine of expansion as businesses recovered from earlier economic disruptions. However, during the April-June quarter of FY2026-27, pricing emerged as the dominant growth catalyst across several industries.

According to Sehul Bhatt, Director, Crisil Intelligence, revenue expansion this quarter was increasingly supported by improved product realisations rather than purely higher sales volumes. "For much of the past two years, revenue growth was powered largely by volume. But this time around, pricing was the primary driver, contributing more to revenue growth than volume in sectors such as aluminium, steel, cement, airlines, fertilisers and gems and jewellery. To be sure, growth was not uniform, but it was broad-based enough to prop the aggregate number," Bhatt said.

Consumers bear the brunt
The ability of companies to increase selling prices reflects relatively healthy consumer demand and improved pricing power across several industries. Despite inflationary pressures, demand remained sufficiently resilient to absorb price hikes without significantly affecting consumption, allowing businesses to protect their revenues against escalating costs.

The automobile sector emerged as one of the strongest performers during the quarter, supported by sustained domestic demand and improving export markets. According to the report, industry revenues are estimated to have grown by an impressive 22-24 per cent year-on-year. The sector benefited from multiple favourable factors, including continued momentum generated by the Goods and Services Tax (GST)-led formalisation of the economy, healthy passenger vehicle sales, robust demand for two-wheelers and commercial vehicles, steady export growth and selective price increases by manufacturers.

Sector-wise performance
India's automobile industry has continued to outperform expectations as improving rural demand, infrastructure spending and higher consumer confidence support vehicle purchases across segments. Export demand has also remained relatively stable, helping manufacturers diversify revenue streams beyond the domestic market. The metals sector also witnessed a sharp improvement, particularly aluminium producers, which benefited from a combination of supply disruptions, tighter import availability and stronger global prices.

Primary aluminium producers are estimated to have recorded revenue growth of 51-53 per cent during the quarter, making the sector one of the standout performers. The report attributes this exceptional growth to reduced imports, higher regional premiums, global supply disruptions and additional production capacity coming on stream. Steel manufacturers similarly benefited from improved price realisations, although the pace of growth was relatively more moderate compared with aluminium producers. Cement companies also witnessed stronger revenues as improved pricing offset rising production costs.

Several other sectors—including chemicals, fertilisers, tyres, gems and jewellery and parts of the consumer goods industry—also reported higher revenues primarily because of improved product pricing rather than significant increases in sales volumes. For industries operating with relatively stable demand, the ability to pass on higher raw material costs to customers proved critical in sustaining revenue growth during a period of rising inflationary pressures.

Profit under pressure
However, the strong revenue performance did not necessarily translate into equally healthy profitability across industries. The report highlights that rising input costs, fuel expenses and logistics charges exerted considerable pressure on operating margins in numerous sectors. The conflict in West Asia significantly affected global energy markets during the quarter, pushing up crude oil prices and increasing transportation costs. These developments had a cascading impact across multiple industries dependent on petroleum products, imported raw materials and international supply chains.

According to Pushan Sharma, Director, Crisil Intelligence, many companies are now experiencing the full impact of higher replacement costs after earlier inventory cushions have gradually diminished. "Margin pressure was most pronounced in sectors where PE-escalation inventory cushions gradually depleted. As replacement costs rose, companies started absorbing higher expenses on industrial diesel, commercial liquefied petroleum gas, freight, packaging and feedstock. The pressure was particularly acute in sectors where pricing power was limited, demand sensitivity was high, or cost escalation was sudden," Sharma said.

He added that industries with significant exposure to crude oil, natural gas, imported inputs and logistics—including airlines, chemicals, petrochemicals, pharmaceuticals, tyres, cement, fertilisers and packaging—experienced the greatest margin pressures during the quarter.

Heating ATF costs
Among the most affected sectors were airlines, where rising aviation turbine fuel prices substantially increased operating costs even as passenger demand remained healthy. Similarly, petrochemical and chemical manufacturers faced higher feedstock costs linked to crude oil price movements, limiting their ability to preserve margins despite improved product prices.

Pharmaceutical companies also encountered rising costs for imported raw materials, while tyre manufacturers contended with higher input and transportation expenses. Cement producers, despite stronger pricing, continued to face elevated fuel and freight costs that weighed on profitability. The fertiliser industry similarly experienced higher production costs owing to increased prices of energy inputs and imported raw materials. Packaging manufacturers were also impacted by rising polymer and logistics costs, reflecting the widespread effects of energy price volatility across the industrial value chain.

Resilient domestic economy
The report underscores that while India's domestic economy remains resilient, geopolitical developments continue to pose significant risks for corporate profitability. Businesses are increasingly required to balance pricing strategies with competitive pressures and consumer affordability, particularly in sectors where demand remains price-sensitive.

Nevertheless, the broad-based nature of revenue growth across industries indicates that India's economic fundamentals remain robust. Healthy domestic consumption, continued infrastructure spending, resilient manufacturing activity and improving investment sentiment have collectively supported corporate performance despite external headwinds.

Outlook
Looking ahead, corporate earnings are expected to remain closely tied to developments in global commodity markets and geopolitical conditions. Should crude oil prices stabilise and logistics costs moderate, companies may witness gradual improvement in operating margins during the coming quarters. Conversely, prolonged geopolitical uncertainty could continue to pressure input costs, requiring businesses to rely further on operational efficiencies, cost optimisation and selective pricing strategies.

The latest Crisil Intelligence assessment suggests that Indian corporates have demonstrated considerable resilience in navigating a challenging global environment. While rising costs remain a concern, the combination of strong domestic demand, healthy pricing power and broad-based sectoral growth has enabled companies to post their strongest quarterly revenue expansion in two years, reinforcing confidence in the underlying strength of the Indian economy.


DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com