India Inc demonstrated a robust performance in the third quarter of the financial year 2026, with a notable 11.4% increase in net sales following a 10% growth in the previous quarter. However, the growth in operating profit slightly moderated to 12% in Q3 FY26 from 15.7% in the prior quarter, mainly due to the rising expenditure of companies.
The overall expenditure surged by 11.2% in Q3, up from 8.7% in the previous quarter, as highlighted in a report by CareEdge Ratings. Factors such as festive-season consumption, GST rate rationalization, previous income tax cuts, and Reserve Bank of India (RBI) rate cuts contributed positively to the overall business activity during the quarter.
Net sales growth was widespread across various sectors including automobiles, information technology, non-ferrous metals, pharmaceuticals, capital goods, and fast-moving consumer goods. However, the increase in expenditure was driven by rising employee costs, service expenses, and raw material prices, with additional outlay towards provisioning for the New Labour Codes under ‘Exceptional Items’ impacting net profitability.
The ratings agency pointed out that employee costs rose by 12.1%, while service and raw material costs increased by 11.4%. Despite a slight decline in operating profit margin to 19% from 19.5% in the previous quarter, the interest coverage improved to 8.4 from 8.1, surpassing the eight-quarter average of 7.9.
Sectors like non-ferrous metals, automobiles & ancillaries, retailing, and capital goods recorded sales growth of over 16% and profit growth exceeding 20%, according to the analysis. The report also emphasized that domestic fundamentals remain positive, with signs of improvement in the consumption scenario driven by various policy measures implemented over the past year.
Regarding investments, the report mentioned that the government has maintained its focus on capex-led growth, with positive indications of a revival in private investments.
