Non-Financial Firms See Slower Topline Expansion; Services, Manufacturing Growth Softens: RBI Data

Sales growth of India’s listed private non-financial companies slowed to 5.5 per cent year-on-year in the first quarter of FY26, down from 7.1 per cent in the preceding quarter and 6.9 per cent in the same period a year ago, latest Reserve Bank of India (RBI) data showed.

The moderation was most visible in manufacturing and IT firms, which together account for a large share of corporate activity. Sales growth of 1,736 listed manufacturing companies moderated to 5.3 per cent in April–June, compared with 6.6 per cent in the January–March quarter, largely dragged by a weak performance in the petroleum sector. Likewise, IT companies, which had seen a steady pick-up since early FY25, recorded a drop in sales growth to 6 per cent against 8.6 per cent in the previous quarter.

Non-IT services, which had been posting double-digit expansion over the past three quarters, also saw sales growth easing to 7.5 per cent, weighed down by slower momentum in transport and storage companies.

On the expenditure side, raw material costs for manufacturing firms rose 4.5 per cent in Q1, much lower than 8.3 per cent in the March quarter. This helped ease the raw material-to-sales ratio to 54.1 per cent from 55.2 per cent in the previous quarter, providing some relief on margins despite muted topline growth.

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With respect to staff costs, it continued to increase across sectors but at a slower pace. Manufacturing companies reported an 8.3 per cent increase, IT firms 5.8 per cent, and non-IT services 8 per cent. The staff cost-to-sales ratio inched up for all three categories, with IT firms’ ratio standing high at 48.8 per cent.

Operating profits presented a mixed picture. While IT companies saw sequential improvement with profit growth of 5.4 per cent and better margins, manufacturing and non-IT services registered moderation, at 6.9 per cent and 11.3 per cent, respectively.

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The interest coverage ratio (ICR)—a measure of firms’ debt servicing capacity—improved for manufacturers to 9.1 in Q1 from 8.7 in the March quarter, reflecting healthier profitability despite the slowdown in revenue growth. The ICR of IT firms remained elevated, while that of non-IT services companies was stable.

The data, compiled from the quarterly financials of 3,079 listed firms, suggests that while corporate India continues to expand, growth momentum has softened in the face of sectoral headwinds and subdued demand in key industries.