Muted Revenue Growth and Steady OPM Expected for India Inc. in Q2 FY2026
ICRA projects subdued revenue growth of 5-6% for India Inc. in Q2 FY2026, with steady operating profit margins due to softened input costs. Challenges arise from geopolitical tensions and US tariffs impacting demand, especially in export sectors. Urban demand recovery lags, despite resilient rural demand and potential GST rate cuts to bolster sentiments.
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Rating agency ICRA anticipates that India Inc. will see muted revenue growth of 5-6% in the second quarter of FY2026, similar to the 5.5% in the previous quarter. Lower input costs, such as crude oil and coal, will maintain the operating profit margin at 18-18.2% year-over-year, according to its release.
Credit metrics for India Inc. are expected to remain stable, with interest coverage ratios at 4.9-5.1 times compared to the first quarter of FY2026. Senior Vice President Kinjal Shah of ICRA noted ongoing geopolitical tensions and high US tariffs affecting export demand in sectors like agro-chemicals, textiles, and IT services.
Despite resilient rural demand, urban demand recovery is slow. Income tax relief and reduced food inflation are positive, while anticipated GST rate cuts could enhance demand. The previous fiscal quarter saw a 5.5% YoY revenue growth driven by consumption and infrastructure sectors, though urban demand has been weak. However, premium product consumption and expansion in hospitality and retail support revenue growth.
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