India's listed private companies reported a 10.1% sales increase in FY26, the first double-digit growth in two years. While manufacturing and services drove demand, rising raw material costs continued to pressure profit margins. Investors may look at how companies handle these higher input costs in future results.
What Happened
Indian private companies have shown a return to stronger growth in the fiscal year ending March 2026. Data from the Reserve Bank of India, covering 4,278 listed non-government, non-financial companies, shows that corporate sales grew by 10.1%. This is a notable shift, as it marks the first time the sector has hit double-digit growth after two years of slower performance.
The improvement was broad-based, with significant contributions from both the manufacturing and services sectors. This growth indicates a steady increase in economic activity and consumer demand, as companies managed to scale up revenue despite a challenging environment in the previous two years.
Manufacturing and Services as Growth Engines
Manufacturing firms were the primary drivers of this resurgence, recording an 10.8% increase in sales, up from just 6% in the previous year. Within this space, sectors such as automobiles, electrical machinery, food and beverages, and chemicals led the way. However, it was not a uniform rise; the petroleum sector struggled during the year and saw a contraction in sales.
In the services sector, Information Technology (IT) companies showed steady progress, with sales growth rising to 7.9% from 7.1%. Meanwhile, non-IT services, which include segments like retail and wholesale trade, continued to maintain a strong double-digit growth trajectory. This resilience in services suggests that demand for digital and consumer-facing services remains robust.
The Margin Pressure Test
While top-line growth (revenue) looks promising, the data reveals a balancing act for profitability. Companies faced a 12.0% increase in raw material expenses during FY26. Consequently, the raw material-to-sales ratio—a measure of how much of each rupee earned goes toward buying raw materials—rose to 57.6% from 55.7% in the previous year.
This means that for every 100 rupees of sales, companies are spending more on inputs, which puts pressure on profit margins. While operating profit growth remained decent—10.3% for manufacturing and 10.7% for IT—the rising cost of materials remains a key factor that can squeeze the money left over for shareholders if companies are unable to pass these costs on to customers.
Debt Health and Stability
One positive takeaway from the data is the improvement in the financial stability of manufacturing companies. Their interest coverage ratio, which indicates how easily a company can pay the interest on its debt, improved to 9.1 in FY26 from 7.9 the year before. This improvement happened because gross profits rose faster than interest expenses, suggesting that these firms are better positioned to handle their current debt obligations than they were a year ago.
What Investors Should Track
Investors may keep an eye on how companies manage the rising cost of raw materials in the coming quarters. If input costs continue to climb, maintaining profit margins will depend on a company’s ability to raise prices without hurting demand. Additionally, the recovery in the automobile and food processing sectors provides a signal to watch for broader consumption trends. The key monitorable remains whether this double-digit revenue growth can translate into sustained profit margin expansion, especially for those sectors that saw a decline in margins during FY26.