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India Inc is likely to post subdued revenue growth of 5–6% in the second quarter of FY26, according to rating agency ICRA. The projected figure is marginally below the 5.5% year-on-year (YoY) growth recorded in Q1 FY26, signaling a cautious outlook amid global headwinds and uneven domestic demand.
Despite the muted topline performance, ICRA expects the operating profit margins (OPM) to hold steady at 18–18.2%, supported by easing input costs such as crude oil and coal. This stability is also reflected in credit metrics, with the interest coverage ratio estimated to remain between 4.9 and 5.1 times — broadly unchanged from the 4.9 times reported in the previous quarter.
Kinjal Shah, Senior Vice President and Co-Group Head – Corporate Ratings at ICRA, noted that geopolitical tensions and elevated U.S. tariffs are weighing on sentiment, particularly in export-reliant sectors such as agrochemicals, textiles, auto components, seafood, cut and polished diamonds, and IT services.
“Domestic rural demand continues to show resilience, but urban demand is yet to see a meaningful recovery,” Shah added. “While factors like income tax relief and easing food inflation offer tailwinds, a sustained pickup in sentiment — potentially aided by GST rate cuts — is essential to reviving urban consumption.”
ICRA’s assessment, based on an analysis of 585 listed non-financial companies, revealed that Q1 FY26 saw 5.5% YoY revenue growth. This was primarily driven by consumption-focused and infrastructure-related sectors. However, on a sequential basis, overall revenues dipped 4.1%, following a seasonally strong Q4 FY25, with real estate, construction, capital goods, hotels, and airlines contributing to the decline.
The agency also highlighted ongoing trends such as premiumisation, with consumers showing a clear shift toward higher-value goods in categories like automobiles, FMCG, and watches — cushioning overall revenue even as volume growth lags.
Additionally, organised players across sectors such as hospitality, healthcare, and jewellery retail are expanding through acquisitions and strategic partnerships, helping to sustain revenue growth amid a challenging macroeconomic environment.
Looking ahead, ICRA suggests that while India Inc’s fundamentals remain largely stable, recovery in demand — especially in urban pockets — will be critical to accelerating growth momentum in the coming quarters.
