India Inc: Impressive Q4 performance, but pain points ahead | Photo Credit: Deepak Verma

India Inc has sprung a surprise by reporting good growth for the January to March quarter of 2026. This is even as markets have been correcting on relentless selling by foreign investors. An analysis of Q4 results shows that 650 companies which have so far reported their numbers, managed a sharp improvement in revenue growth to 13.7 per cent with healthy profit growth of 17.8 per cent over the same quarter last year.

Revenue growth accelerated from 11.7 per cent in Q3 and 8 per cent in the preceding two quarters respectively, while profit growth has gathered pace from 11.2 per cent in Q3 and 6.5-7 per cent in the first two quarters. Operating profit margins improved to 30.3 per cent for Q4 FY26, compared to 26.3 per cent in the preceding quarter despite commodity inflation. However, these numbers don’t reflect results from oil majors. Whether the earnings momentum will sustain as the real impact of ongoing energy shock and supply chain disruptions plays out, remains to be seen.

There are many takeaways from a macro economy perspective. One, both the urban and rural legs of the consumption economy fired in tandem this quarter. While good revenue growth for FMCG (14 per cent growth) and retail (12 per cent growth) showed healthy spends on staples; discretionary consumption also received a boost going by the sales growth momentum in automobiles (30 per cent revenue growth), e-commerce (141 per cent), realty (35 per cent), financial services (48 per cent) and jewellery (47 per cent). This suggests that the demand stimulus from the GST cuts announced in September 2025 have carried forward so far. Two, investment spending did well in pockets, going by revenue acceleration in segments such as railways (28 per cent growth), electrical goods (43 per cent) and power equipment (131 per cent). Three, India Inc’s margins displayed resilience to spiralling energy, chemical and metal prices due to the war. However, companies were still using up inventories of industrial inputs. Rupee depreciation bolstering realisations for services exporters, could also have offset the margin hit taken by manufacturing companies. The real test of this will lie in whether current margins sustain once input inventories are depleted.

Four, companies reported improving interest coverage (7.5 times against 7.1 times at the same time last year), despite the rise in borrowing costs, suggesting that they remained frugal on debt. On the flip side though, India Inc continued to be reluctant to share its growth bounty with employees. As revenues expanded nearly 14 per cent and profits 18 per cent year-on-year, employee costs dropped to 13.8 per cent of revenues from 14.5 per cent a year ago. This shows wages growing more slowly than corporate profits — a worrying trend given that enterprise AI adoption has not even begun. Overall, while the fiscal year FY26 has closed on a positive note, FY27 may be a different ballgame, where inflation tests consumer spending, and increase in input costs squeezes margins.

Published on May 18, 2026