Industry Odisha Bureau, Aug 21: India Inc delivered stronger-than-expected earnings during the June quarter of FY27. Nifty 50 profits surged approximately 18% year-on-year, nearly doubling Street estimates. Yet the earnings recovery was deeply uneven, benefiting large corporations disproportionately. Smaller companies continued facing margin pressure and struggled to keep pace.
Strong revenue growth accompanied the profit improvement across India’s broader corporate base. Nominal revenue increased 21% year-on-year, while inflation-adjusted real growth accelerated to nearly 17%. Both figures marked their strongest performance across the preceding three years. The gap between nominal and real growth suggested pricing gains supported revenue expansion. However, underlying volume growth also contributed meaningfully to reported revenue figures.
Commodity-linked companies provided an outsized share of India Inc’s total profit gains. Hindalco revenue surged 26% year-on-year as aluminium prices benefited from supply deficits. ONGC revenue jumped nearly 46% when West Asia tensions pushed crude oil. Prices reached $90 to $100 per barrel during the reported quarter. These gains significantly boosted aggregate Nifty 50 earnings through commodity-exposed companies. However, margin pressure among smaller firms moderated the overall profitability picture.
The company-size divide emerged as the most striking feature of earnings season. Large companies with revenue exceeding ₹10,000 crore posted 17% revenue growth overall. However, their profit growth reached only 2% amid continued losses at oil marketing. Medium-sized firms with revenue between ₹1,000 crore and ₹10,000 crore surged ahead. Their profits jumped 24% year-on-year, marking a six-quarter performance high. Small companies, representing nearly 90% of India Inc, saw just 5% profit growth. These smaller firms account for approximately 10% of total corporate profits. This concentration underscores how skewed India’s earnings distribution has become recently.
A handful of large corporations drove much of the incremental profit accretion. ONGC, Hindalco, Reliance, JSW Steel and Bharti Airtel accounted for 60% gains. This concentration highlights the risks of dependence on select companies and sectors. Banking and financial services continued anchoring India’s corporate profit pool this quarter. Banks remained the largest contributor for their 17th consecutive quarter running. Finance and banking together represented nearly 40% of all corporate profits. Credit growth reached approximately 20% year-on-year in June, the highest level. This represented a two-year peak in terms of credit-expansion momentum. Information technology emerged as the third-largest profit contributor during the quarter. IT profits increased roughly 21%, supported by rupee depreciation versus the US dollar. The rupee declined approximately 2.5% during the June quarter against the US dollar.
However, corporate margins deteriorated despite the stronger revenue and earnings performance. Net profit margins compressed to 8.7% from 12.1% in the previous quarter. Total expenditure as a percentage of net sales reached 86% in Q1 FY27. This compared to approximately 90% during Q2 of FY23, suggesting cost pressures. OMC losses and squeeze on smaller-firm profitability drove the margin compression.
The breadth of corporate profitability nonetheless showed signs of genuine improvement recently. Only one in five companies reported losses during the June quarter reported. This represented an improvement from one in four companies during the previous quarter. The loss-making share stood at its lowest level across the preceding three years. This suggested stronger earnings at large and medium-sized companies partially broadened the recovery.
The Street expects Nifty 50 profits to grow 18% throughout FY27. However, brokerages view this guidance as ambitious and potentially unsustainable throughout. Much of the current momentum relies on fading tailwinds from commodity prices. Rupee depreciation benefits, consumption stimulus and low-base effects cannot persist indefinitely going forward. With limited room for price increases and margin expansion ahead, FY27 earnings momentum appears uncertain.
