India Inc saw net profit growth of 3.6 percent during the September quarter, which was the slowest growth in 17 quarters, driven by sluggish revenue growth and rising interest and depreciation costs. Total expenses and other income also edged up only slightly.
Aggregate net profit for the September quarter of 694 listed companies rose by just 3.6 percent year-over-year — the slowest growth since June 2020 quarter — according to ACE Equities. This was also significantly lower than the 15 percent growth in the June quarter and the 29 percent increase a year ago.
Moneycontrol data reveals that net sales growth stood at 8.04 percent in the September quarter, down from 8.4 percent in the previous quarter—marking the sixth consecutive quarter of single-digit revenue growth.
Operating profit margins were at 22.03 percent in September quarter, the slowest growth in six quarters, compared to 23.05 percent in June quarter. This analysis excludes banks, financial services, and oil and gas companies, which follow distinct revenue models.
Analysts expect slightly weaker-than-expected results for consumer goods firms, with subdued urban demand offset by positive rural growth. The festive season will be key for signs of recovery. Rising commodity costs may lead companies to consider price hikes, supporting revenue growth in H2FY25. Meanwhile, the rapid growth of e-commerce and quick commerce is challenging traditional trade growth across the industry.
For instance HUL's Q2 net profit fell by 2.4 percent, with revenue growing 2 percent amid weak urban FMCG demand and slow rural recovery. Volume growth was 3 percent. The company anticipates low single-digit price increases if commodity prices hold steady.
Avenue Supermarts, parent entity of DMart, also faced slower same-store sales growth, driven by rising competition from quick commerce players like Blinkit and Swiggy Instamart. Limited store expansion and cautious growth forecasts suggest a challenging outlook as quick commerce moves beyond metro areas.
Meanwhile, Maruti Suzuki reported a 17 percent drop in Q2 net profit, driven by soft festive sales, higher inventory, and weaker demand in the sub-Rs 10 lakh segment. Chairman RC Bhargava highlighted the decline in this segment as a key concern, with reduced profits also impacted by changes in tax benefits and long-term capital gains taxes on debt mutual funds.
IT firms posted solid results but remain cautiously optimistic, reflecting lingering uncertainties. While discretionary spending hasn’t fully picked up, a report by Motilal Oswal Financial Services predicts a gradual rise in modernisation and selective discretionary spending, with US banking recovery continuing to gain momentum. Growth is also expected in healthcare, manufacturing, and ERP modernisation as clients reinvest savings from cost-cutting. However, certain sectors and regions remain soft: Communications and Hi-Tech saw muted growth, European auto weakness impacted manufacturing, and Q3 furloughs are expected to be similar to last year.
Cement firms saw muted volume growth and declining realisations due to pricing pressure. Consumer durables missed operating profit estimates, hit by raw material cost volatility affecting margins in C&W. Chemical firms faced ongoing pricing pressure, with limited recovery in end-use industries. Managements of chemical firms expect H2FY25 to improve over the first half, though growth guidance remains unclear, analysts noted.
Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, stated that Q2 earnings and management commentary were disappointing for the markets. Revenue softness can be attributed to the general elections, erratic monsoons, and flooding in various states, leading to a demand shock. Additionally, decreased government capex and the RBI's failure to cut interest rates have further dampened sentiment, he said.
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