India Inc.'s revenue is expected to have grown 11–11.5 per cent year-on-year in the first quarter of FY27, driven largely by price hikes and partial cost pass-through, even as corporate profitability came under pressure from rising input costs, according to a Crisil Intelligence report.
The report estimates that aggregate EBITDA margins contracted by 75–100 basis points during the quarter, as companies were unable to fully pass on higher expenses related to fuel, freight, packaging and raw materials to consumers.
Cost Pressures Squeeze Margins
According to Crisil, sectors with significant exposure to crude oil, natural gas, imported inputs and logistics witnessed the sharpest pressure on profitability. Airlines were among the worst hit, with higher aviation turbine fuel (ATF) prices and softer passenger traffic expected to result in an estimated 1,000 basis point decline in Ebitda margins.
Tyre manufacturers are also likely to see margins shrink by 200–300 basis points owing to rising natural rubber, carbon black and synthetic rubber costs. Fertiliser companies faced higher input costs for gas, ammonia, sulphur and phosphoric acid, while pharmaceutical firms grappled with rising raw material, power and logistics expenses alongside pricing pressure in the US market.
Pushan Sharma, Director, Crisil Intelligence, said margin pressure intensified as companies exhausted lower-cost inventories and began absorbing higher replacement costs across industrial diesel, commercial LPG, freight, packaging and feedstock. He noted that sectors with limited pricing power and high demand sensitivity faced the greatest challenges.
Domestic Demand Supports Select Sectors
Despite the cost headwinds, several sectors delivered resilient revenue growth. Pharmaceuticals are estimated to have recorded around 12 per cent revenue growth, supported by healthy domestic demand, new product launches and exports to semi-regulated markets.
IT services revenue is expected to have grown by around 5 per cent, aided mainly by favourable currency movements, although enterprise spending remained cautious. Export-oriented industries such as textiles and processed food, however, faced disruptions due to higher freight rates and longer shipping schedules.
Meanwhile, sectors with stronger cost pass-through mechanisms, including power generation, telecom services, hospitals and parts of the metals sector, were better positioned to safeguard profitability.
Outlook Hinges On Costs And Demand
Looking ahead, Crisil expects corporate performance to depend on companies' ability to raise prices without hurting demand, protect volumes and manage persistent pressures from fuel, freight, feedstock and packaging costs. The progress of the southwest monsoon, which could influence rural demand and food inflation, along with geopolitical developments affecting energy prices, will also remain key variables for India's corporate sector. |
