Corporate Sector's Q4 Rally: Sales Surge Drives Double-Digit Growth Amid Rising Input Costs (RBI Report)

Corporate Sector's Q4 Rally: Sales Surge Drives Double-Digit Growth Amid Rising Input Costs (RBI Report)​

The Reserve Bank of India (RBI) has released a detailed performance assessment of the private corporate business sector for the fourth quarter (Q4) of 2025-26. The data, based on abridged financial results from 3,266 listed non-government non-financial companies, highlights robust aggregate sales growth across the industry. However, the report also underscores significant cost pressures related to raw materials, posing a challenge to margin maintenance for manufacturers.

Aggregate Sales Performance Reaches Double-Digit Highs​

At an aggregated level, listed private non-financial companies recorded a substantial double-digit sales increase of 13.9 per cent in Q4:2025-26. This marked an improvement from the 10.1 per cent growth observed in the preceding quarter (Q3). The sustained momentum shows that corporate revenues are expanding at a strong pace, although sequential trends require closer examination across specific sectors.

The manufacturing segment showed particular strength, with sales expanding by 14.5 per cent year-on-year. This acceleration was primarily propelled by significant growth in the automobiles, electrical machinery, and non-ferrous metals industries. Information Technology (IT) companies also saw improving trends, reporting a 9.9 per cent increase in sales, up from 8.8 per cent in Q3.

Services Sector Outperforms Amid Strong Trade Growth​

The services sector demonstrated remarkable strength in Q4:2025-26. Sales growth for non-IT services companies improved substantially to 20.3 per cent compared to the previous quarter. This strong performance was mainly driven by increased sales within the wholesale and retail trade industry segment of the economy.

While manufacturing firms were bolstered by capital goods industries, the services sector registered impressive double-digit expansion. The data provides a clear picture of differential growth, contrasting the robust service expansion with input cost volatility observed in heavy manufacturing segments.

Input Cost Pressures Escalate Across Manufacturing Firms​

The report reveals substantial challenges related to operational expenses for companies involved in production. Raw material expenses for manufacturing firms rose significantly by 18.3 per cent year-on-year during Q4:2025-26. This increase contributed to the raw material to sales ratio rising to 58.5 per cent, up from 57.5 per cent in the previous quarter.

This shift indicates mounting input cost pressures across the manufacturing base. Staff cost growth moderated within the manufacturing sector, rising by 9.8 per cent compared to Q3:2025-26. In contrast, staff cost for non-IT services companies rose at a faster rate of 8.9 per cent.

Profitability Dynamics Across Industries​

Operating profit growth exhibited varied trends across different corporate segments during Q4. For manufacturing companies, operating profit moderated to 9.4 per cent in Q4:2025-26, down from 11.8 per cent reported in the previous quarter. This moderation highlights how input cost pressure affected operating leverage.

Conversely, both the IT and non-IT services segments demonstrated improved profitability. Operating profit growth for IT companies reached 14.1 per cent, while non-IT services firms posted a healthy improvement of 6.5 per cent during Q4. Sequential trends in operating margin showed stability for manufacturing but a moderation trend across the entire services sector.

Debt Servicing Capacity Improves For Manufacturers​

The assessment of debt servicing capacity reveals strengthening trends within key industrial groups. Manufacturing companies saw an improvement in their Interest Coverage Ratio (ICR) to 9.5 in Q4:2025-26, up from 9.0 in the preceding quarter. This indicates better performance relative to interest expenses.

Within the services sector, the ICR for non-IT companies remained stable at 2.3 across Q4 and Q3. Meanwhile, IT firms continued to maintain an elevated level of the Interest Coverage Ratio during this period, suggesting sound financial health even amidst market volatility.