Private Companies Experience Surge in First Quarter Sales, While Rising Costs Impact Profit Growth

MUMBAI: The private corporate sector in India experienced a significant surge in sales at the start of FY27, with a year-on-year increase of 19.4% to Rs 21.6 lakh crore in Q1FY27. This growth marks a notable improvement from 5.5% in Q1FY26 and 13.9% in Q4FY26. However, net profit growth lagged behind, rising only 14.1% to Rs 2.3 lakh crore, a slowdown compared to 17.6% in Q1FY26 and 27.1% in Q4FY26.

Net Profit Growth Slows Amid Rising Costs

The disparity between sales and profit growth indicates that while companies maintained strong operational momentum, rising input costs and increased tax provisions limited profit margins. Total expenditure surged by 20.8% in Q1FY27, up from 5.2% in Q1FY26 and 15.1% in Q4FY26. Raw material costs saw a significant rise of 25.3%, compared to increases of 4.8% and 17.8% in the previous two quarters. Power and fuel expenses also escalated by 19.3%, reversing previous declines.

Tax provisions were the most significant contributor to rising costs, increasing by 26.3% year-on-year. In contrast, interest expenses slightly decreased by 0.4% in Q1FY27, providing a rare relief in the expense categories.

Sectoral Performance and Labour Costs

Sales growth varied across sectors, with information technology companies reporting a strengthened growth rate of 14.8% in Q1FY27, up from 9.9% in the previous quarter. Non-IT services companies continued to show robust performance, achieving a sales growth of 19.7%, only slightly below the 20.3% recorded in the previous quarter, primarily driven by wholesale and retail trade.

Labour costs also increased, with staff costs rising by 12.4% in manufacturing, 7.6% in IT, and 11.2% in non-IT services during Q1FY27. This uptick in labour costs was higher than the growth rates in the previous quarter. Additionally, staff costs as a share of sales increased to 5.5% for manufacturing firms and 10.1% for non-IT services, while the ratio for IT companies declined from the previous quarter.

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