Back in black: Indian companies start FY26 on a profitable note

Mint

05-08-2025

Indian companies, long mired in a sluggish demand environment, are finally seeing a faint glimmer of hope. While the overall earnings picture for the June quarter remains subdued, the start of the fiscal year offers a tentative sign of relief. The silver lining? A significant drop in the number of loss-making companies and a notable jump in firms that have managed to reverse their fortunes, moving from red to black. This shift, though modest, signals a crucial turning point, hinting that a broader recovery might be on the horizon.
Earnings turnaround
A Mint analysis of 1,047 companies reveals a promising shift in corporate performance. The standalone data, sourced from Capitaline and based on first-quarter results, shows that the share of loss-making firms has hit a five-quarter low, dropping sharply to 16.4% in Q1FY26 from 21% in the previous quarter. But the real story is in loss reversals. A total of 110 firms—or 11% of the sample—swung from losses to profits, a substantial jump from 75 firms in Q4FY25 and a near doubling since Q3FY25.
This turnaround is perhaps best illustrated by the significant increase in the positive-to-negative turnaround ratio. This crucial metric, which compares the number of companies moving from losses to profits against those doing the opposite, soared to 1.64 times in Q1FY26 compared to just 0.80 times in the previous quarter.
Notable turnarounds included the likes of Quess Corp, a leading workforce management firm, which posted a ₹52.71 crore profit after a ₹81.26-crore loss in Q4. Fintech giant One 97 Communications (Paytm) also swung into the black with a ₹63 crore profit, ending two consecutive quarters of losses on a standalone basis. This welcome trend of loss reversals also extended to Motilal Oswal Financial Services, Network 18 Media, and Piramal Enterprises, suggesting a broad run of good fortune for some companies.
Crucially, the long-term sustainability of these turnarounds will hinge on whether they were driven by fundamental operational improvements or one-time factors.
Cautious outlook
Meanwhile, companies witnessing a negative turnaround in their profits during the quarter fell to 67, down from 94 in Q4FY25. This shift, however, tells a cautious story as several of these newly struggling firms were previously stable or consistently profitable. For instance, MRPL and Chennai Petroleum posted losses after several strong quarters, hit by weak refining margins.
The timing of these turnarounds is particularly noteworthy. They have taken place against a challenging economic backdrop, characterized by tight global liquidity, ongoing geopolitical strains, and an uneven domestic consumption recovery.
The crucial question is whether this marks the beginning of a more stable growth cycle, leading to upgrades this earnings season: A recent Mint survey (between 25 and 30 July) of 34 investment professionals provided a starkly split verdict. While 47% of respondents expected downgrades to slightly outpace upgrades, a matching 47% believed downgrades have bottomed out at current levels, with a projected earnings pick-up from the second half of 2025-26.
As the second quarter begins and the festive season approaches, all eyes will be on whether this momentum sustains.