Exporters are bleeding while air conditioners are booming: inside India Inc’s uneven Q1

Not every corner of India Inc had the same Q1. While ratings agency Crisil estimates overall corporate revenue will grow 11-11.5% in the April-June quarter of FY27, the gains are far from evenly spread, with some sectors thriving on strong domestic demand and others squeezed by exporting costs and global disruption.

Exporters bore the brunt this quarter. Textiles, pharmaceuticals and processed food companies faced disruption from higher freight rates and longer shipping schedules. Pharmaceuticals held up comparatively well — revenue is estimated to grow 12% on domestic demand, new product launches and exports to semi-regulated markets — but rising input and logistics costs, along with pricing pressure in the US, weighed on margins.

On the other end, consumer-facing sectors are having a strong quarter. Intense summer heat drove up demand for air conditioners and other seasonal appliances, a sharp reversal from a year earlier when heavy rains dampened sales. Automobiles, white goods, telecom services, power generation, steel and healthcare all drew support from resilient domestic demand, while telecom companies specifically gained from premiumisation and data monetisation.

The earnings season itself has been gathering pace through July, with Reliance Industries reporting on Friday and HDFC Bank, ICICI Bank and Kotak Mahindra Bank following on Saturday. Crisil said profits have grown consistently across the results declared so far, even though some companies missed analyst estimates. Sehul Bhatt, director-research at Crisil, said pricing rather than volume is behind most of this quarter’s growth — a reversal from the past two years.

Airlines fared the worst of all: rising aviation turbine fuel costs, combined with softer passenger traffic, are estimated to push operating profit margin down by around 1,000 basis points. Construction also lagged, with revenue estimated to rise just 1-3% as geopolitical disruptions delayed project execution and revenue recognition despite healthy order books; L&T is due to report its Q1 FY27 results on 28 July.

Crisil expects overall corporate operating profit margin to contract 75-100 basis points year-on-year as companies absorbed part of the cost increases themselves. It named three factors that will shape earnings ahead: balancing further price hikes against demand, recovering costs without losing sales volumes, and relief in fuel, freight and raw material pressures — alongside the monsoon’s bearing on rural demand and food inflation, and the West Asia conflict’s effect on energy prices.

Wikimedia Commons/by Appaiah