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India earnings rebound faces margin squeeze as costs rise

PL Capital said operating margins are falling alongside stronger sales and net profit, with supply-chain disruptions and higher crude prices pressuring multiple consumer and industrial segments.

Reported · Written up by our desk · Emerging Markets

India’s corporate earnings recovery is looking less secure as margins weaken even while revenue and headline profit growth accelerate, according to LiveMint Markets. The outlet said companies in PL Capital’s coverage universe, excluding oil and gas, posted 15.5% sales growth in the June quarter, the strongest since Q4FY24, and net profit growth of 17%, also the highest since Q4FY24. However, EBITDA growth lagged at 9.6%, and overall EBITDA margins fell by 148 basis points, pointing to a widening divergence between bottom-line earnings and operating efficiency. LiveMint Markets reported that PL Capital attributed the margin decline primarily to supply-chain disruptions and higher crude prices affecting auto, cement, consumer, and travel segments. The brokerage also warned that pressure could intensify as companies start using higher-cost raw materials in the second and third quarters. Beyond near-term cost dynamics, the outlet highlighted additional risks to the recovery later in the year, including weak monsoons and potential El Niño conditions, softer rural demand and farm incomes, repeated price hikes in essential goods that could weigh on consumer sentiment, and higher global commodity prices. PL Capital added that while Nifty EPS growth is expected to rise to 17.7% in FY27 from 1.6% in FY26, it believes that 17.7% target is at risk.

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