India Inc to hit 5-6% revenue growth in Q2: ICRA
What's the story
Rating agency ICRA has projected a muted revenue growth of 5-6% for India Inc. in the second quarter of FY2026. This is a slight increase from the 5.5% growth recorded in the previous quarter. The agency attributes this moderate growth to softening input costs such as crude oil and coal, which are expected to keep operating profit margins stable at around 18-18.2% on a year-on-year basis.
Financial stability
Interest coverage ratio expected to remain stable
ICRA has also predicted that the credit metrics of India Inc. for Q2 FY2026 will remain largely stable. The agency expects an interest coverage ratio between 4.9-5.1 times, slightly up from the 4.9 times recorded in Q1 FY2026. This stability comes despite the geopolitical tensions and US tariffs that continue to impact demand sentiments, especially for export-oriented sectors like agro-chemicals, textiles, seafoods, auto components, cut and polished diamonds, and IT services.
Demand trends
Urban demand yet to recover meaningfully
Kinjal Shah, the Senior Vice President and Co-Group Head - Corporate Ratings at ICRA Limited, has said that while domestic rural demand remains resilient, urban demand is yet to recover meaningfully. She added that despite factors such as income tax relief and easing food inflation, a recovery in sentiments would be crucial for an uptick in urban demand. In this context, expected GST rate cuts could provide some stimulus to demand.
Consumption trends
Performance of India Inc in Q1 FY2026
ICRA's analysis of 585 listed firms (excluding financial sector entities) in Q1 FY2026 showed a 5.5% YoY revenue growth. This was led by healthy demand in the consumption-oriented and infrastructure-oriented sectors. However, after a strong Q4 FY2025, revenues of India Inc declined sequentially by around 4.1% in Q1 FY2026, mainly due to real estate, construction, capital goods, hotels, and airlines sectors.