Portfolio Review – 1Q FY27

Note: For year-on-year (YoY) comparisons, we have used a rolling four-quarter format – Q2FY26 to Q1FY27 compared with Q2FY25 to Q1FY26. This approach allows us to better assess the portfolio’s growth by minimizing the impact of quarterly seasonality.

*Itus Portfolio EBITDA margin is below Nifty 50 because for banks and NBFC, EBITDA margin proxy would be PPOP/ net total income. Nifty 50 has an exposure of 33% to Banks and NBFC where the average of 9 companies PPOP/ net total income was more than 55%. Itus portfolio has a bank and NBFC exposure of 13%.

Sector exposure (in Exhibit 2) continues to reflect our preference for businesses where earnings visibility is anchored in hard asset characteristics, supply-side discipline, and structural demand. Our overweights in mining, capital goods, logistics, and chemicals are directed at sectors where domestic capex and global demand provide a durable earnings backdrop.

During the quarter, we have added exposure to consumption, FMCG, and auto, reflecting our conviction in an improving consumption environment and a strengthening demand outlook. We see scope for these themes to benefit from improving consumer spending and supportive income trends.

Against this backdrop, three structural themes anchor our positioning this quarter — a broadening consumption recovery, an NBFC funding upcycle meeting a strong vehicle-finance rebound, and a CDMO industry entering its harvest phase. We take these in turn.

Consumption: Positioned for Recovery

Q1 was a strong quarter for consumption. Across the board — with the exception of footwear — segments delivered double-digit topline growth. Below is the YOY top-line growth in Q1 27 across various consumption categories

Source: Avendus Spark, ITUS Research

We look at one of the sub segments – electrical consumer durables (ECD), where all companies have registered double digit growth in Q1 27. Below is the trend in topline growth for this segment over the last 5 quarters.

Source: ITUS Research

Growth in the quarter comes on the back of a weak FY26. The segment saw headwinds in the previous year – weak summer leading to shorter selling season and build up in inventory ahead of the summer season led to the entire space having a weak FY26. Hence, growth in this segment needs to be seen in that context, however certain trends and macro factors do point to a direction where growth can sustain going forward.

Some of the observations from the results of the companies are

• Industry growth of Room Acs has been 22%, all companies have registered strong growth in this segment with Voltas growing its room AC volumes by 45%. Other notable developments – LG selling 1 million RAC units and Whirlpool’s AC revenues growing by 50%
• Companies are going into FY27 with normalized channel inventory
• All companies are betting on the premiumization theme and have various offerings moving consumers up the price curve

Beyond the near-term base effect, the macro backdrop also supports a durable consumption recovery.

Source: MOSPI

Private final consumption expenditure (PFCE) measures the spending by households on final goods and services. The above chart captures PFCE at constant prices, removing the effect of price inflation and highlighting the growth in volume of goods and services consumed by households. Real PFCE growth has accelerated to 7.8% in FY26 from 5.7% in FY25, indicating improvement in underlying consumer spending and providing a supporting demand environment for sub segments like consumer durables.

Another factor that can propel growth is the 8^th Pay Commission, this could provide an additional boost to disposable income from FY28.

Bringing it together

To bring it all together, the electrical consumer durable segment is coming into FY27 on a lower base of FY26, PFCE growth is accelerating, and the 8th Pay Commission provides an additional catalyst going forward. All these factors bode well for consumer space.

NBFC: Phase of robust AUM Growth

*includes Bajaj Finance, Chola, Shriram Finance, L&T Finance. Source: RBI, Company filings

Historically, there has been a broad relationship between NBFC bank funding and AUM growth, with the direction of change matching in 6 to 7 of the last 10 years. The relationship, however, has weakened during periods of industry-specific stress or when NBFCs have substituted across funding sources.

In FY19, bank borrowing increased sharply even as AUM growth moderated, as NBFCs shifted toward bank funding following the IL&FS-led disruption in capital markets. In FY24, AUM growth remained strong despite slower bank borrowing, supported by diversified funding sources. In FY26, bank borrowing accelerated sharply and AUM growth held around 22% despite the high base — an important signal that funding tailwinds are once again reinforcing the AUM cycle.

Current scenario – Funding tailwinds meets a strong vehicle finance recovery

Source: RBI

NBFC borrowing from banks has accelerated sharply, moving from single digit growth till Q2FY26 to mid-teens in Q3FY26 and above 30% by Q1FY27. This was supported by 100 bps rate cut happened in FY26 which lowered bank lending rates, making bank borrowing more attractive for NBFCs relative to capital market instruments

Under NBFCs, vehicle finance stands out as an interesting category, with 2W and 4W volumes remain subdued till Q2FY26 before turning to double-digit YoY growth from Q3FY26, aided by the GST rate cut. This recovery has also translated into system retail vehicle-finance credit growth, which accelerated to high-teens in Q3FY26 and has sustained that momentum since.

Source: RBI, SIAM

CDMO: Entering the Harvest Phase

FY25: The Setup Year – Momentum Builds

FY25 was a period of build-out for Indian CDMOs — the top companies delivered 15–19% revenue growth despite a challenging macro environment. There was a gradual shift in the growth mix towards innovative, higher-value programs like manufacturing of products under patent, late-stage clinical trials, HPAPIs, ADCs and sterile injections.

There were increased investments in peptide synthesis, fermentation, gene therapy and sterile filling and finishing operations.

FY26: The Stress Test – Destocking, Funding Gaps and Recovery

FY26 was more difficult to navigate, characterized by a process of destocking a significant amount of its proprietary commercial product and an uneven funding environment for the biopharma sector in the US, resulting in weaker H1 orders from early-stage projects and a visible reset in reported revenue.

Recovery emerged from October 2025 with RFP activity and order inflows improving and biopharma funding rising in H2FY26.

Q1FY27 Broad-Based Recovery

Q1FY27 marked a clear inflection — median CDMO revenues grew 56% YoY across the top players.

The growth was driven by NCE supply, late phase clinical shipments, custom synthesis, peptides, and ADC related services. Three catalysts are now reinforcing the recovery: biopharma funding is recovering into H1CY26, FY24–FY26 capex is entering its revenue-generating phase, and deep molecule pipelines provide visibility for near-term commercial conversion.

Source: Company Filings

Portfolio Implications and Watchpoints

Taken together, the three themes point in the same direction — earnings growth in the businesses we own is being reinforced by strengthening domestic demand, easier funding conditions, and a normalising global backdrop. The takeaways below summarise how this shapes our positioning, and the metrics we are watching to confirm the durability of the setup.

Portfolio Snapshot — Q1FY27

Taken together, our stock selection and sector positioning reflect this dynamic. The table below gives an overview of the health of our portfolio as of Q1FY27 (snapshot as of July 2026).

Note: The sum of above weights would not total up to 100%; remaining would be our cash holdings.

Team Itus