Inflation Hedging at Company Level | Quick ₹eads

by Karnivesh | 26 February 2026

India's inflation clock ticked at 5.5% CPI in January 2026, up from 4.8% prior month, with food inflation double digits. In a Gurgaon factory manager's office, the conversation isn't about RBI targets it's about passing on costs without losing customers, securing raw material hedges, or tweaking product mixes to protect margins. Companies that master this dance see EBITDA hold steady while peers bleed; inflation hedging at firm level isn't portfolio theory, it's daily survival.​

Pricing power: the first line of defence

Walk into an Asian Paints store in Bengaluru and the lesson in pricing power becomes immediately visible. When raw material costs surged nearly 12% in Q3 FY25, management did not attempt to pass on the entire burden. Instead, it implemented selective 4–5% dealer price hikes, calibrated by geography and product tier. Volumes still grew 8.2% YoY, while EBITDA margins compressed by a contained 120 basis points to 17.5%. The contrast with smaller or less-branded peers was stark: without pricing leverage, they absorbed most of the inflation hit, suffering 300 bps or more margin erosion.

The same playbook appears in FMCG. Britannia Industries delivered 9% revenue growth in Q1 FY26 to ₹4,434 crore, even as input costs rose around 6%. Rather than broad-based price hikes, Britannia leaned into premiumisation, pushing higher-value packs and variants most visibly in Good Day, where premium SKUs now account for roughly 25% of the portfolio. This allowed the company to pass through 3–4% effective price hikes without denting demand. While the broader FMCG sector saw average 7% value growth accompanied by a 2% volume decline, Britannia preserved both volumes and profitability, holding EBITDA margins near 11% versus an industry average of ~9%.

In cement, pricing power often works in tandem with cost management. UltraTech Cement mitigated petcoke inflation by locking into long-term fuel contracts, limiting cost inflation in Q3 FY25 to about 5%, compared with 15% spot price spikes faced by unhedged peers. Volumes rose 10% to 28.3 MTPA, realisations improved 4%, and EBITDA per tonne stayed stable around ₹1,200. Competitors without hedging saw nearly ₹200 per tonne erosion, underscoring how pricing power is amplified when paired with disciplined input strategies.

Supply-chain rewiring as margin armour

Inside the blast furnace control rooms at Dolvi, JSW Steel exemplifies how supply-chain control translates directly into margin resilience. By locking imported coking coal at $220 per tonne through annual contracts, JSW insulated itself when spot prices spiked to $280. The result was an 18% EBITDA margin in FY25, comfortably ahead of peers like Tata Steel, which reported closer to 14% margins due to higher spot exposure.

Backward integration has become an increasingly powerful hedge. Adani Green Energy reduced import dependence by nearly 40% through captive solar module manufacturing. Amid global polysilicon inflation, this translated into savings of roughly ₹2 per kWh, lifting Q3 FY26 EBITDA margins to 74% versus a sector average near 65%. At an even larger scale, Reliance Industries has internalised close to 70% of crude processing through its Jamnagar refinery complex, now operating at ~60 MMTPA capacity. This vertical integration dampens forex and commodity volatility, helping deliver FY25 EBITDA of approximately ₹1.8 lakh crore, even amid global energy price swings.

Inventory and forex: tactical levers that buy time

Sometimes, resilience comes from tactical execution rather than structural advantage. A Maruti Suzuki dealer in Jaipur exemplifies this at the retail level. By carrying nearly two months of inventory procured at pre-hike steel prices, dealers were able to sell through a period of 6% steel inflation. Q3 FY26 volumes still grew 5%, despite a 3% increase in average selling prices. In contrast, competitors running lean just-in-time models had no buffer and were forced to pass on nearly 8% input cost increases, resulting in flat volumes.

For exporters, currency management plays a similar role. Tata Consultancy Services hedged ~98% of its US and European dollar revenues nearly 12 months forward at around ₹83/USD, compared with spot levels near ₹87. While FY25 revenue growth was modest at 6.7%, margins remained stable at ~25%, whereas less-hedged peers saw 200 bps compression. Infosys followed a comparable approach, with ~70% hedging coverage, preserving FY26 H1 EBITDA margins around 21%.

Product mix mastery: earning through inflation

Inflation winners increasingly distinguish themselves through mix optimisation rather than raw volume growth. Nykaa provides a clear illustration. In Q4 FY25, luxury beauty which carries margins close to 25% grew 25%, offsetting a 5% volume decline in mass products impacted by 8% input inflation. Despite revenue growth of 24%, EBITDA surged 43% to ₹133 crore, lifting overall margins to 6.5% from 5.6%. A similar premium-led approach in fashion drove 18% GMV growth, reinforcing operating leverage.

Platform businesses have also adapted. Zomato reported adjusted EBITDA of ₹1,079 crore in FY25, even as revenues surged 67%. Inflation-linked ~3% platform fee adjustments, combined with Blinkit’s private-label sourcing at ~20% lower input costs, pushed quick-commerce GOV up 93%, turning contribution margins positive at 2.1%.

Operational gears and financial engineering

Operational efficiency remains a quiet but powerful lever. Godrej Consumer Products shut down nearly 15% of low-margin factories and centralised procurement, saving around 200 bps in costs despite 10% palm oil inflation. As a result, Q3 FY26 India EBITDA margins improved to 15.8% from 14.2%, alongside 8% revenue growth in select categories.

In discretionary segments, innovation can substitute for cost inflation. Titan Company expanded its Tanishq lab-grown diamond offerings, which rely on inputs ~20% cheaper than gold. Even as gold prices rose 12% and jewellery volumes dipped 5%, lab-grown diamonds grew 30% in FY25, helping Titan deliver 25% overall revenue growth with resilient margins.

Finally, balance-sheet design matters. Larsen & Toubro has structured nearly 70% of its debt as fixed-rate, long-term borrowings at around 8%, shielding it from 50 bps repo rate hikes in FY26. Interest coverage stands near 6x, far stronger than peers at ~3.5x, ensuring uninterrupted execution of its ₹5.5 lakh crore order book. Similarly, Adani Enterprises timed a ₹5,000 crore QIP in FY25 ahead of peak inflation, funding green capex while keeping debt-to-equity near 1.65x. EBITDA grew 26% to ₹16,722 crore, demonstrating how capital timing can be as important as operational strength.

The larger message

Across sectors, the pattern is clear: inflation does not destroy value weak strategy does. Companies that combine pricing power, supply-chain control, smart inventory and forex management, product mix optimisation, operational discipline, and thoughtful capital structuring are not merely surviving cost cycles they are widening competitive gaps. In today’s environment, resilience is no longer defensive; it is an active source of long-term advantage.

Inflation's Sector Scorecard

Winners hedge proactively. Cement EBITDA/tonne stable ₹1,200 amid 10% fuel inflation via contracts. Auto ancillary pricing +6%, volumes +8%.

Losers react late. Textile firms spot cotton exposure crushed margins 400bps FY25; formalisation lag hurt. E-commerce losses widened despite scale revenue growth can't hedge without pricing discipline.

FY26 CPI 5.5% tests resilience. RBI projects 4.8% FY27; firms with hedges gain share.

The Hedging Playbook

India Inc blends:

• Pricing discipline (Asian Paints +4-5% selective)

• Supply contracts (JSW coal locks)

• Mix shifts (Nykaa luxury pivot)

• Integration (Adani modules)

• Forex discipline (TCS 12-month hedges)

Inflation 5-6% erodes 1-2% real returns unhedged. Britannia's 11% margins compound; peers' 9% lag. UltraTech's ₹1,200/tonne holds purchasing power.

Mastering inflation isn't RBI watching it's daily decisions preserving real earnings value. In India's 7% GDP race, hedging firms pull ahead.