First, the good news. In an encouraging sign of resilience, India’s major companies recorded strong growth in the last fiscal year after a two-year hiatus, benefiting from commodity cycles and cost management that helped them navigate tough market conditions at home and abroad.

Leaving this much cheer is a bit of bad news: uncertainty in West Asia despite the end of the war between the United States and Iran. Even the status of the Strait of Hormuz, which represents a transit point for 60% of global oil trade, is unclear despite the truce.

Recognizing the multiple clouds hanging over the economy, the Reserve Bank of India on June 5 lowered its GDP growth forecast from 6.9% to 6.6% and raised consumer price index-based inflation expectations from 4.8% to 5.1%.

No wonder analysts are cautious. For example, Shreyash Devalkar, head of equities at Axis Mutual Fund, says the future performance of companies will depend on evolving macroeconomic conditions. “Since the war began, there have been changes in macroeconomic parameters and input costs, while none of them were reflected in the last results season,” says Devalkar.

The changes he refers to are currency movements – the rupee has depreciated significantly against the dollar since the US and Israel declared war on Iran at the end of February; ارتفاع العجز في الحساب الجاري في الهند (CAD) وتأثيره على أسعار الفائدة. وارتفعت أسعار المواد الخام والوقود وحتى تكاليف التعبئة والتغليف.

PIP Revenue Earnings

To return to the good news, companies in FY2026 reported stronger profitability and improved balance sheets. Data from ACE Equity database shows that Nifty 500 companies posted combined net profits of Rs 18.2 lakh crore in FY26, an increase of 14% from Rs 15.9 lakh crore in FY25.

ومع ذلك، فإن وتيرة نمو الإيرادات كانت بطيئة. The combined revenue of Nifty 500 companies rose nearly 6% year-on-year to Rs 168 lakh crore in FY26.

While revenue expansion has slowed, many industries have achieved strong earnings growth through better cost management, improved commodity cycles and healthier balance sheets. “Looking ahead, the FY27 outlook has seen some moderation in earnings outlook as higher commodity prices impact margins and demand environment,” says Vikram Chhabra, chief economist at asset management firm 360 ONE Asset. He said one encouraging aspect of FY26 earnings is the “green shoots of consumption, which have been lagging over the past few years.”

“Consumption showed lasting signs of recovery, with automobiles, fast-moving consumer goods and several discretionary categories witnessing higher demand during the second half, largely supported by GST rationalization,” he added.

The pace of corporate earnings has eased following strong post-pandemic growth, says Aditya Khemani, fund manager at Invesco MF. “Over the last couple of years, Indian corporate earnings growth has slowed. However, there is a notable discrepancy in this, with large companies seeing slower earnings growth compared to SMEs. While Indian companies remain on par with healthy balance sheets and strong cash flows, accelerating earnings growth from current levels is essential,” he says.

transformation

على مدى العقد الماضي، شهدت الشركات الهندية تحولا كبيرا في الحجم والربحية. An analysis of 451 Nifty 500 companies that have reported financials continuously over the past 10 years shows their combined revenues increasing from Rs 61.7 lakh crore in FY16 to an estimated Rs 164.2 lakh crore in FY26.

ورغم أن مسار النمو تعطل بسبب الجائحة، فإن التعافي كان سريعا وواسع النطاق. Revenue expanded sharply by 25% in FY22 and 21% in FY23 as economic activity normalized and demand rebounded. The total net profit of Nifty 500 companies more than quadrupled in FY26 from Rs 4 lakh crore in FY16.

As companies expanded, their total expenses increased from Rs 52.8 lakh crore to Rs 136.5 lakh crore during the same period. ارتفعت تكاليف الموظفين من 6 كرور روبية إلى 16.5 كرور روبية. The rise in these highlights the increased scale of operations, capacity expansion, workforce additions and increased investments in business growth. Despite these higher costs, companies were able to achieve profits at a faster pace.

The main driver of this trend was the sharp improvement in operating profitability, which jumped by 256% between fiscal years 2016 and 2026. This indicates that companies improved their productivity, benefited from operating efficiencies and achieved better cost management as revenues expanded.

وكان هناك عامل مهم آخر وهو النمو البطيء نسبياً في تكاليف التمويل. While interest expenses rose 164% over the decade, their growth rate remained much lower than the increase in operating profits.

As a result, the gap between operating profits and interest liabilities has widened, enhancing interest coverage ratios and reducing financial pressures across corporate balance sheets.

ويتجلى التحسن في الربحية أيضًا في الارتفاع الحاد في الضرائب المدفوعة. Tax expenditure rose from Rs 1.5 lakh crore in FY16 to Rs 5.2 lakh crore in FY26, an increase of 243%. Higher tax payments reflect stronger earnings generation and demonstrate that earnings growth has been broad-based and sustainable.

Increased resilience

Taken together, the data suggests that Indian corporate net profit growth has been driven by a combination of factors: sustained revenue expansion, improving operating margins, better cost management, stronger balance sheets, and lower financing costs relative to earnings.

In FY25, one of the biggest changes at India Inc was the revival of capital spending. Whether this will continue can be confirmed only when FY26 data becomes available. According to industry data, the total capex of Nifty 500 companies rose from Rs 3.91 lakh crore in FY16 to Rs 9.98 lakh crore in FY25. The increase indicates that companies are moving beyond balance sheet repair and focusing on expansion.

Capex growth slowed during FY2020 and FY2021, partly due to economic uncertainty caused by the pandemic, but investment recovered strongly from FY2022 onwards.

Capex rose by 17% in FY22, followed by 25% growth in FY23 and around 20% in FY24. By FY25, spending reached Rs 9.98 lakh crore, an increase of 12.4%. وقد صاحب الزيادة في الإنفاق الرأسمالي ارتفاع في الاقتراض. This has come alongside stronger profitability and investments, suggesting companies are using leverage to fund expansion rather than simply support operations.

Market performance

In FY26, dividends for large-cap stocks jumped 12% year-on-year, while stocks in the small-cap Nifty 250 index registered a meager 2% rise. Stocks of 150 mid-cap companies achieved strong earnings growth of 42% in the last fiscal year.

After recovering from the pandemic, since FY22, the large-cap Nifty 100 stocks have posted an increase in earnings of 67% and the small-cap Nifty stocks have risen by 72%. With gains of 165% in the last four years, mid-cap Nifty stocks have emerged as outperformers.

The sectoral breakdown of earnings of Nifty 500 companies in FY26 shows that among the major sectors, banking had the highest contribution of 23%, making it the dominant single sector.

The oil and gas sector accounted for 13% of total profits, followed by finance at 11% and information technology at 8%. وساهم كل من قطاعي السيارات والطاقة بنسبة 5%، وهو ما يمثل أصغر الحصص في التوزيع.

Iron and steel companies recorded the strongest growth, seeing a 188% rise in profit after tax. كما أعلنت شركات الطاقة عن نمو صحي، مع زيادة أرباحها بنسبة 18%.

According to a report by Motilal Oswal Financial Services Ltd (MOFSL), total corporate earnings in the MOFSL universe, covering 359 companies across large-cap, mid-cap and small-cap sectors, grew 16% year-on-year in the quarter, significantly ahead of the estimated 8% increase.

Recovery, but with risks

Invesco’s Khemani says the improvement in earnings became evident around the December quarter. “In fact, many high-frequency indicators, such as credit growth, suggest that economic activity strengthened in the March quarter,” he says. “It is also important to note that commodity prices rose during March due to the ongoing West Asia crisis. As a result, a clear theme in the March quarter was commodity producers outperforming commodity consumers.”

The broader picture suggests that Indian companies have entered a stronger but more selective growth phase, relying more on sector-specific drivers. Financials, metals, energy, manufacturing and other sectors remain major drivers of earnings while consumer and technology companies face a challenging environment.

A rising capex cycle signals confidence among businesses, but geopolitical uncertainty, commodity prices and global demand remain important factors.

Khemani says any solution to the conflict in West Asia could lead to a sharp decline in commodity prices, especially crude oil, with a positive impact on the economy.

He had a word of caution to investors: “It is important to remember that the global environment is much more volatile than in the past. Therefore, investors should maintain a minimum investment of four to five years when participating in the stock markets.”

@PrinceInMedia