- Energy and currency pressures strain corporate margins and plans.
A sharp escalation in geopolitical tensions in West Asia is beginning to weigh heavily on Corporate India, with a surge in commodity prices disrupting cost structures and forcing companies to rethink both pricing and investment plans.
From consumer-facing businesses to industrial sectors, companies are grappling with rising raw material costs, currency pressures and supply disruptions, a combination that is expected to impact margins in the coming quarters.
Cost Pressures Spread Beyond Crude
While crude oil has emerged as the most visible casualty of the conflict, the impact is far wider.
Brent crude prices have climbed nearly 33 per cent since the beginning of the war, setting off a chain reaction across industries dependent on petroleum-linked inputs.
At the same time, prices of key industrial materials, including urea, naphtha, sulphur, titanium dioxide and PVC resins, have surged between 20 per cent and 70 per cent over the past month and a half. This sharp escalation has significantly raised input costs for multiple sectors, reported The Financial Express.
Pricing Becomes The First Line Of Defence
With margins under pressure, companies are increasingly leaning on price hikes to offset rising costs.
FMCG firms, consumer durable manufacturers and paint companies have already begun adjusting product prices, signalling a broader trend across industries.
Dabur Global CEO Mohit Malhotra said the current environment marks a turning point for corporate planning.
“We are entering a phase where input cost inflation may outpace pricing power,” he said, adding that the West Asia conflict has “turned projections for FY27 on its head”. He noted that companies are now prioritising cost management over expansion, with investments likely to resume only when conditions stabilise.
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Energy Costs Ripple Through The Economy
The rise in crude oil prices is having a cascading impact across sectors.
Analysts estimate that every $10-per-barrel increase in crude oil prices widens India’s current account deficit by about 0.4 per cent of GDP, while also adding to inflationary pressures.
For oil marketing companies, this translates into tighter marketing margins, particularly in a sensitive pricing environment. Airlines, meanwhile, are increasing fares as aviation turbine fuel, which accounts for 35-40 per cent of operating costs, becomes more expensive.
Logistics companies are also seeing a steady rise in fuel costs, pushing up transportation expenses across supply chains.
Inventory Buffers Offer Limited Relief
In sectors such as paints, companies are relying on short-term inventory buffers to manage cost pressures, but these are proving insufficient.
Berger Paints Managing Director and CEO Abhijit Roy explained that while companies maintain inventory for a limited period, they will eventually have to procure raw materials at prevailing higher prices.
“We keep finished goods inventory of about 40-45 days. For raw materials, we keep stock of around 25-30 days. While we have two months of inventory, it can last up to April-end. We will still have to buy raw materials at current prices. To neutralise this impact, we have to increase product prices,” Roy said.
The April-June quarter is particularly crucial for paint companies due to seasonal demand, making cost management during this period critical.
Fertiliser Sector Faces Dual Challenge
The fertiliser segment is emerging as one of the most affected areas due to its reliance on imports and energy inputs.
India imports around 30 per cent of its fertiliser requirement, with nearly 40 per cent of these imports coming from West Asia. In the case of urea, about a quarter of annual consumption is imported.
Shortages have already begun affecting production, while rising global prices could significantly increase the government’s subsidy burden in FY27 if the conflict continues.
The dependence on liquefied natural gas (LNG) further complicates the situation. Around 80 per cent of urea production in India relies on LNG, much of which is sourced from Qatar and the UAE via routes passing through the Strait of Hormuz, a region currently impacted by the conflict.
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Currency Movements Add Another Layer
Alongside rising global prices, currency fluctuations are amplifying the pressure on companies.
The rupee has weakened against the US dollar amid global risk aversion, increasing the cost of imports. For industries dependent on overseas sourcing, this results in a double impact, higher base prices and a weaker currency.
Capex Plans Put On Hold
With uncertainty rising, companies are beginning to reassess expansion plans.
The immediate focus has shifted towards protecting margins and managing costs, rather than pursuing aggressive capital expenditure. Investment decisions are likely to be deferred until there is greater clarity on the geopolitical situation and commodity price trends.
