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West Asia conflict pushes India Inc raw material costs to 3-year lows

Raw materials rose to about 45% of net sales and roughly 50% of total expenditure in April-June FY27, helping drive operating margins to 15.3% and net profit margins to 8.4%.

Reported · Written up by our desk · Trade & Tariffs

LiveMint reports that the West Asia conflict has created a steeper raw material cost shock for Indian companies than the earlier Russia-Ukraine war, pushing profitability down to three-year lows. The analysis highlights that input costs took up a larger share of both expenditure and sales in the April-June quarter of FY27 than at the peak of the 2022 crude-linked commodity crisis.

According to LiveMint, a Mint analysis of standalone earnings from 642 non-banking, financial services and insurance companies found raw material costs accounted for nearly 45% of net sales and about 50% of total expenditure during the quarter. The outlet said manufacturers spent nearly ₹45 out of every ₹100 earned on raw materials, and that almost half of every rupee of expenditure went toward procuring inputs.

LiveMint adds that weaker margins were visible in aggregate results, with net profit falling nearly 9% year-on-year in Q1 FY27, the weakest performance in almost two years. Operating margins contracted about 450 basis points to 15.3%, while net profit margins declined nearly 300 basis points to 8.4%, both the lowest since FY23.

At the index level, LiveMint says the Nifty 500 net profit margin shrank to 9.8% from 11.3% a year earlier even as sales grew 21% in Q1. The outlet also cites Abhishek Mishra of SKG Investments and Advisory, who said the 153-basis-point contraction already exceeds the latest forecast of a 100 bps margin hit for FY27 based on the current situation in West Asia.

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