India Inc gives weakest performance on profit front in seven quarters

India Inc has reported a muted start to the financial year 2024-25, with a decline in net earnings and a modest single-digit uptick in revenues.

An analysis of 488 companies that have released their results for the June 2024 quarter reveals a 1.6 per cent year-on-year (Y-o-Y) drop in combined net profit -- the weakest performance in the past seven quarters.

In stark contrast, the combined net profit of these companies experienced a 13.6 per cent Y-o-Y increase in the previous quarter (Q4FY24) and a 65.2 per cent Y-o-Y rise in Q1FY24.

For Q1FY25, these firms reported combined net earnings of Rs 2.65 trillion, a 9.5 per cent decrease from the record high of Rs 2.93 trillion in Q4FY24 and a dip from Rs 2.69 trillion in Q1FY24.

The subdued corporate results underscore challenges on the demand front.

Net sales (including gross interest income for banks and non-banking lenders) of the companies in Business Standard's sample increased by 8.8 per cent Y-o-Y in Q1FY25.

While this represents a slight deceleration from the 9.1 per cent growth recorded in Q4FY24, it shows improvement compared to the 7 per cent growth in the corresponding year-ago period.

These companies reported combined net sales of Rs 25.57 trillion for the April-June 2024 period, down from Rs 26.12 trillion in the previous quarter but up from Rs 23.5 trillion in Q1FY24.

These 488 firms collectively account for nearly 60 per cent of the total market capitalisation of all companies listed on the BSE.

When including their 23 listed subsidiaries that have disclosed quarterly results, the sample represents around 61 per cent of the total market capitalization of BSE-listed companies.

There are 39 of the Nifty 50 companies in the sample.

As in previous quarters, corporate earnings in Q1FY25 were primarily driven by the BFSI (banking, financial services, and insurance) and automotive sectors.

However, the oil & gas, mining, and metals sectors weighed heavily on overall earnings.

Notably, the contribution from the BFSI and automotive sectors declined in Q1FY25, with both sectors experiencing slower revenue and profit growth in the period under review.

"The aggregate performance was hit by a sharp drag from global commodities.

"Excluding metals and oil & gas, the Motilal Oswal Financial Services (MOFSL) Universe and Nifty posted higher-than-expected earnings growth in Q1FY25.

"The earnings growth was fuelled by the BFSI and automotive sectors.

"Along with metals and oil & gas, the earnings of the cement and specialty chemicals sectors decreased during the quarter,  stated analysts at Motilal Oswal Securities in their mid-season earnings review report.

The combined net profit of 397 companies in the sample, excluding BFSI firms, fell 9.4 per cent to Rs 1.57 trillion in Q1FY25 from Rs 1.73 trillion in Q1FY24; the figure was Rs 1.79 trillion in Q4FY24.

This marked the worst performance since the September 2022 quarter when profits declined by 20.5 per cent Y-o-Y.

In contrast, the non-BFSI firms reported a 6.1 per cent Y-o-Y increase in combined net sales to Rs 19.46 trillion in Q1FY25, achieving the fastest growth rate in the past five quarters.

The 91 BFSI companies in the sample witnessed a 12.5 per cent Y-o-Y increase in combined net profit in Q1FY25, albeit at the slowest pace in at least 17 quarters.

These firms recorded a combined net profit of Rs 1.08 trillion in the June 2024 quarter, up from Rs 0.96 trillion in Q1FY24 but down from Rs 1.14 trillion in Q4FY24.

The BFSI companies  combined net sales (or gross interest income) grew 18.3 per cent over the past year in Q1FY25, marking the slowest growth in eight quarters.

Their net sales had increased by 34.1 per cent Y-o-Y in Q1FY24 and 22.4 per cent Y-o-Y in Q4FY24.

However, combined net earnings of companies excluding BFSI and oil & gas (including Reliance Industries) rose 7.1 per cent Y-o-Y, the lowest in the past six quarters.

These firms reported a combined net profit of Rs 1.3 trillion in Q1FY25, up from Rs 1.21 trillion in Q1FY24 but down from Rs 1.42 trillion in Q4FY24.

In comparison, the combined net sales of these companies grew 7.5 per cent Y-o-Y in Q1FY25, a deceleration from the 8.5 per cent growth in Q1FY24 but an improvement from the 7.1 per cent growth in Q4FY24.

The oil & gas sector (including Reliance Industries) experienced a 47.7 per cent Y-o-Y decline in combined net profit, reaching Rs 27,304 crore in Q1FY25, the lowest in the past six quarters.

Nevertheless, these companies  combined net sales increased by 3.9 per cent year-on-year in Q1FY25 -- the fastest growth in the past five quarters.