With resilient rural demand and a gradual recovery in urban consumption, the rating agency ICRA has estimated that Indian companies to sustain favourable Year-on-Year (Y-o-Y) revenue growth of 8-10% in Q4 2025-26 (vis-a-vis 10.6% YoY increase in Q3 2025-26). Further, the operating profit margin of India Inc. is expected to expand by 50 to 75 basis points (bps) on a YoY basis. Thus, the credit metrics are likely to remain healthy, with an estimated interest coverage ratio of 5.3-5.5 times in Q4 2025-26, broadly stable compared with 5.3 times recorded in Q3 2025-26.

ICRA noted that policy tailwinds like Goods & Services Tax (GST) rate rationalisation, income tax relief announced in the Union Budget 2025, cumulative reduction of 125 bps in policy rates by the Reserve Bank of India between February and December 2025, and easing food inflation are expected to support a gradual revival in urban consumption. Besides, the reduction in US tariff and various free trade agreements have improved the medium-term growth prospects for export-oriented sectors such as textiles, diamonds, leather, and auto components. However, it pointed that the uncertainty in the trade environment will continue in the near term, given the tariff vacillations, ongoing geopolitical tensions, and the evolving supply-chain realignments.

On Indian companies’ Q3 2025-26 performance, it said that GST 2.0 reforms impacted various sectors differently. It noted that consumption-oriented sectors such as automobiles emerged as key beneficiaries, reflected in around 20% YoY growth in sales volumes across several segments in Q3 2025-26. In contrast, the EBITDA margins of printing and writing paper companies witnessed pressure owing to the emergence of an inverted duty structure, while mid-scale hotel operators recorded a modest margin dip due to withdrawal of certain input tax credit benefits. Besides, export-oriented sectors faced margin pressure due to higher US tariffs than that of competing countries. Moreover, commodity price trends resulted in divergent sectoral outcomes with gold jewellery retailers benefitted from the continued uptrend of gold prices, copper miners reported growth in revenues & margins driven by higher copper prices.