Page 40 - CII-ARTHA

ARTHA

Manufacturing Regains
Figure 1: Performance of Non-financial
listed companies (Excl oil & gas) Momentum
Manufacturing had a strong quarter with sectoral sales
11.0 9.7 9.7 10.1 10.4 growth accelerated sharply to 9.4 per cent from
10.0 9.5 9.3 9.6 9.5 5.8 per cent in Q2FY26, driven by two standout
performers: consumer durables surged 23.8 per cent
9.0
8.0 year-on-year and automobiles rose 21.7 per cent. Both
sectors benefited from resilient rural demand, stable
7.0 9.6 interest rates, robust credit expansion, and the
6.0 7.9
7.0 7.4 7.5 demand-stimulating effect of GST rationalisation on
5.0 5.8 5.5 5.8 select categories.
4.0
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
FY24 FY25 FY26 The one weak spot was textiles, which declined by
1.2 per cent, down from 4.7 per cent in Q2FY26.
Export-oriented segments remained subdued, facing a
Net Sales (y-o-y%) PAT Margin
combination of slowing global demand and rising tariff
pressures in key destination markets. The divergence
Source: CMIE Prowess, Balanced panel of 2,680 listed non-financial between domestically oriented sectors (strong) and
companies as extracted on 20th Feb, CII analysis.
export-oriented sectors (still under pressure) remains
important to monitor.

In manufacturing sector, growth of raw material costs
(which account for around 70 per cent of manufacturing
expenses) jumped to 8.6 per cent from 4.6 per cent in the
prior quarter, and wage expenses rose to 10.2 per cent -
the fastest pace in recent quarters. The one source of
relief was interest expenses, which continued to decline
at 5.2 per cent year-on-year.

The PAT margin held at 9.5 per cent despite this cost
surge reflects the operating leverage of strong revenue
growth - fixed costs spread over a larger sales base. But
this buffer narrows if revenue growth slows while cost
pressures persist.

Figure 2: Trends in Main Cost Items (y-o-y%)

20.0
13.8
15.0 10.2 10.7
8.6 8.4 8.3
10.0 6.2 6.6
4.6
5.0 2.2
0.0
-5.0
-10.0 -5.2
-8.8
-15.0
Raw Material Wage Expense Interest Raw Material Wage Expense Interest
Manufacturing Services

Q2FY26 Q3FY26

Source: CMIE Prowess, CII analysis

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