MUMBAI: The private corporate sector began FY27 with a marked acceleration in sales, but the improvement was less impressive at the bottom line as rising input costs and tax provisions absorbed much of the gain. An analysis of listed non-financial companies by Reserve Bank of India showed sales rising 19.4% year-on-year to Rs 21.6 lakh crore in Q1FY27, up sharply from 5.5% in Q1FY26 and 13.9% in Q4FY26.Net profit, by contrast, grew 14.1% year-on-year to Rs 2.3 lakh crore, slower than the 17.6% growth in Q1FY26 and 27.1% in Q4FY26. Operating profit offered a more encouraging picture, growing 19.3%, compared with 7.3% in Q1FY26 and 9.8% in Q4FY26. The divergence suggests that companies retained considerable operating momentum, but rising costs, following supply-chain disruptions caused by the war in West Asia, and higher tax provisions constrained what reached the bottom line.
Net Profit Grows 14.1% YoY, Slower Than 17.6% In Q1FY26
The main culprit was expenditure. Total expenditure rose 20.8% in Q1FY27, compared with 5.2% in Q1FY26 and 15.1% in Q4FY26. Raw-material costs increased 25.3%, accelerating from 4.8% and 17.8% in the two preceding periods. Power and fuel expenses, meanwhile, rose 19.3%, reversing declines of 6.1% in Q1FY26 and 4.7% in Q4FY26. Tax provisions recorded the sharpest increase among the major expense items, rising 26.3% year-on-year. Interest expenses were the lone major expense category to decline, falling 0.4% year-on-year in Q1FY27.The sectoral picture was broadly supportive. Sales growth among information-technology companies strengthened to 14.8% year-on-year in Q1FY27 from 9.9% in the previous quarter. Non-IT services companies continued to record double-digit growth of 19.7%, only marginally below 20.3% in the previous quarter, led mainly by wholesale and retail trade.Labour costs also gathered steady pace. Staff costs at manufacturing, IT and non-IT services companies rose 12.4%, 7.6% and 11.2%, respectively, in Q1FY27, higher than their growth in the previous quarter. Staff cost as a share of sales increased to 5.5% for manufacturing companies and 10.1% for non-IT services companies. For IT companies, however, the ratio declined from the previous quarter.There was also evidence that companies retained some pricing power despite the squeeze on inputs. Operating-profit growth at manufacturing companies accelerated sharply to 21.3% year-on-year in Q1FY27 from 9.4% in the previous quarter. IT and non-IT services companies also saw operating-profit growth improve to 19.9% and 12.7%, respectively, during Q1FY27.
