 "Early bird result for Q2FY25 signals a continued slowdown in India Inc")
Corporate revenue and earnings growth stayed sluggish in the second quarter of 2024-25, reflecting a challenging demand environment, according to early bird results for companies.
The net profit (adjusted for exceptional items) of 167 firms — that have come out with their September quarter results— grew just 5 per cent year-over-year (Y-o-Y), flat vis à vis the first quarter of FY25 but sharply lower than the 16 per cent Y-o-Y expansion in the same period last year. These firms in Business Standard’s sample posted combined net earnings of Rs 90,685 crore for Q2FY25 quarter, compared with Rs 87,569 crore in Q1FY25 and Rs 86,388 crore a year earlier.
Net sales (gross interest income in case of lenders) grew a modest 7 per cent Y-o-Y in the July-September period — marking the slowest pace in five quarters and barely edging past the post-pandemic low of 6.7 per cent in Q1FY24. Cumulative revenue reached Rs 7.4 trillion, up from Rs 7.22 trillion in Q1FY25 and Rs 6.92 trillion in Q2FY24.
Market analysts are largely unimpressed by these results amid lack of bright spots. “The numbers are disappointing so far, except for the IT services sector where earnings and revenue slightly exceeded expectations. Banks are showing a slowdown in credit growth and margin contractions, while consumer demand remains weak across sectors like FMCG, automotive, retail, and cement,” said Dhananjay Sinha, co-head of research and equity strategy at Systematix Institutional Equity.
Early results dominated by banks and IT services companies
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These early results are dominated by banks and IT services companies, which together accounted for 71 per cent of the combined net profit and 50.2 per cent of net sales in Q2FY25. Reliance Industries -- India’s biggest company by revenue, assets, profit and market capitalisation -- which represents 18.3 per cent of the combined earnings and 31.3 per cent of sales, also underwhelmed, reporting a 4.8 per cent Y-o-Y drop in net profit and a 0.2 per cent decline in net sales on a consolidated basis for Q2FY25.
Sixteen IT services firms, including Tata Consultancy Services, Infosys, Wipro, and HCL Technologies, reported 10.4 per cent Y-o-Y per cent growth in the combined net profit to Rs 29,703 crore in Q2FY25, versus Rs 28,859 crore in Q1FY25 (up 9.2 per cent Y-o-Y) and Rs 26,906 crore in Q2FY24 (2.6 per cent Y-o-Y). Their top-line rose 5.7 per cent Y-o-Y, the steepest in five quarters, to Rs 1.89 trillion, driven by robust performance. For comparison, these companies' net sales were up 3.7 per cent Y-o-Y in Q1FY25 and 5.7 per cent Y-o-Y in Q2FY24.
Despite a slowdown in profit and revenue growth, BFSI (banking, financial services, and insurance) firms emerged as top performers in the second quarter of 2024-25. However, their Y-o-Y numbers are not strictly comparable because of Axis Bank’s $1.41 billion acquisition of Citibank India’s retail business in March 2023. The combined net profit of 46 BFSI firms in the sample (including HDFC’s historical numbers) rose 12.2 per cent Y-o-Y to Rs 34,727 crore in the September quarter (it was Rs 33,016 crore, up 7.6 per cent Y-o-Y, in Q1FY25 and Rs 30,953 crore, up 12.6 per cent Y-o-Y, in Q2FY24).
Their gross interest income grew 13.2 per cent to Rs 1.83 trillion, against Rs 1.75 trillion in Q1FY25 and Rs 1.61 trillion a year ago. Nevertheless, this marked the slowest gross interest income growth in 10 quarters.
Excluding BFSI and IT services, corporate profitability remained under pressure. Companies outside these sectors posted a combined net profit of Rs 55,958 crore in Q2FY25, barely up from Rs 54,552 crore in Q1FY25 and Rs 55,435 crore a year ago. Their net profit fell to Rs 26,255 crore, down from Rs 28,529 crore in Q2FY24; it, however, was better than the Rs 25,693 crore in Q1FY25.