While India Inc had to contend with the impact of the Middle East conflict for nearly one-third of Q4FY26 (the month of March), recovering demand and higher volumes helped offset cost pressures.

For the quarter, India Inc delivered healthy revenue and adjusted PAT growth (PAT adjusted for extraordinary items) of 14 per cent and 18 per cent year-on-year, respectively. Excluding the 41 BFSI companies from the 647 firms that had reported results till May 7, 2026, revenue and adjusted PAT growth stood at 17 per cent and 18 per cent y-o-y, respectively.

Ex-BFSI, gross margins declined by 68 bps y-o-y to 57.2 per cent, but EBITDA margins remained flat. This implies two things. Firstly, the gross margin decline indicates supply chain challenges from the ongoing US-Iran conflict have manifested sharply in the quarter. Two, companies benefitted from volume growth as fixed overheads were spread over larger volumes, as indicated by flattish EBITDA margins despite lower gross margins.

While the earnings print is strong, the 7 per cent correction in the Nifty 50 year-to-date may be justified given the uncertainties ahead. Without a quick resolution to the Middle East war cost pressures can amplify in FY27. Oil marketing companies are yet to pass on the impact of higher crude oil prices on retail fuel. If done this may have a bearing on consumption.

Further it is also important to note that major oil marketing companies are yet to report results. During periods like this, their results can have a reasonable adverse impact on the overall trend.

India Inc’s balance-sheet strength, however, remains resilient, with the interest coverage ratio improving to 7.5 times in Q4FY26 from 7.1 times in Q4FY25.

Among sectors, Capital Goods and Pharmaceuticals posted strong EBITDA margin expansion of 163 bps y-o-y and 210 bps y-o-y, respectively, while Power Generation and Cement witnessed margin contraction of around 160-170 bps y-o-y.

Better-off sectors

While most sectors have delivered strong growth in the quarter, Capital Goods, Automobiles and Power Generation are more likely to sustain the momentum. FMCG and Banks are likely to face a mixed outlook, while IT, Refineries and Cement may face challenges.

Capital goods delivered the best growth in Q4 with revenue and adjusted PAT growth at 43 and 68 per cent, respectively. Among sector leaders, BHEL reported a strong revenue growth of 37 per cent y-o-y aided by EBITDA margin expansion of 500 bps, the company reported a 155 per cent y-o-y growth in adjusted PAT.

The sector can deliver good growth aided by multiple tailwinds, including the power infrastructure upcycle, railway electrification, private capex recovery, data-centre investments and defence spending. Demand for power infrastructure remains particularly strong, with India’s peak power demand recently touching 256 GW and expected to rise further.

Automobiles segment enjoyed strong volume growth across categories, including exports, along with price hikes.. Maruti Suzuki reported 11 per cent YoY growth in both volumes and pricing, translating into 24 per cent YoY revenue growth, though EBITDA margins remained flat at 11.7 per cent. Mahindra & Mahindra posted 26 per cent YoY volume growth, aided by a 38 per cent rise in tractor sales.

However, operating leverage gains were partly offset by commodity inflation, particularly in copper, aluminium and other industrial inputs which saw sharp spurt in prices during the quarter. The impact of conflict-driven supply chain disruptions on margins will remain a key monitorable, though companies have shown some pricing and operating flexibility.

Mixed outlook

For banks, the credit growth now is being led by corporate and commercial segments, with retail and housing are witnessing slower growth. Bellwether HDFC reported commercial segment credit growth at 17 per cent y-o-y compared to 6 per cent y-o-y growth in retail. Net interest margin compression is expected to be stable as HDFC and ICICI reported -2 bps and +6 bps improvement in NIMs in the quarter. Asset quality remains healthy, but risks may emerge as an extended war can hurt SME prospects.

FMCG volume growth continues to recover despite sharper price increases at the consumer end. Industry leader Hindustan Unilever reported volume growth of 6 per cent y-o-y in Q4FY26 (2 per cent in Q4FY25) and an implied price growth of 2 per cent y-o-y in the quarter. But the gross margins declined by 120 bps in the quarter to 50.7 per cent as input costs have risen by 8-10 per cent y-o-y due to supply chain issues. This is expected to impact margins further.

Challenging sectors

Indian IT companies are guiding for a marginally better FY27, though concerns around AI-led disruption remain significant. Companies benefited from rupee depreciation in Q4. While global IT spending remains healthy, this has not translated into stronger growth for Indian IT services firms, as spending is increasingly being directed toward AI-focused projects. The revenue and profitability potential from Indian IT firms partnering with AI ecosystems should become clearer in FY27.

In the oil and gas sector, oil marketing companies — which are yet to report earnings — are expected to reflect significant margin pressure. Standalone refiners, however, remain relatively well placed due to elevated gross refining margins (GRMs). Compared to historical GRMs of $6-7 per barrel, companies reported $13-14 per barrel during the quarter. Although GRMs are expected to moderate, they are still likely to remain above pre-conflict assumptions through FY27-28. That said, windfall taxes on refining exports and higher procurement, insurance and logistics costs could erode part of the gains.

Cement prices are improving along with volumes as capacity expansion is reflected in growth for Ultratech, Ambuja and Shree cements. The three leading companies reported 8-10 per cent y-o-y volume growth and 1-2 per cent y-o-y pricing growth. But sharp raw material cost increase — including a 7 per cent YoY rise in UltraTech’s raw material cost per tonne and 26 per cent increase for Shree Cement — weighed on profitability. Sector EBITDA margins declined 170 bps y-o-y during the period. As a result, even with stronger volumes, profit growth is likely to remain modest going forward.

Despite India Inc’s robust quarterly performance, supply chain disruptions are likely to remain the primary investor overhang. Concerns are further amplified by the risk of softer demand if the conflict persists. Market prospects continue to hinge on an early resolution to the geopolitical tensions. .

Published on May 9, 2026