Nifty 50 Q3: 27 firms see YoY profit growth, 28 report revenue rise

Among the Nifty heavyweights, ICICI Bank, Reliance Industries, BPCL, Infosys, and TCS posted stronger-than-expected results. On the other hand, Coal India, ONGC, Tata Motors, JSW Steel, IndusInd Bank, and Ultratech Cement missed estimates.

As many as 37 companies that are part of the benchmark Nifty 50 index have announced their December quarter numbers and a little more than half – 19 to be precise – have missed analyst estimates with the remaining managing to better the projections.

Out of these 37 firms of Nifty companies, 28 reported a marginal year-on-year and sequential increase whereas eight firms posted a decline in revenue.  In terms of net profit, 27 companies recorded a year-on-year increase. On a sequential basis, 24 firms saw marginal increase in net profit.

Among the Nifty heavyweights, ICICI Bank, Reliance Industries, BPCL, Infosys, and TCS posted stronger-than-expected results. On the other hand, Coal India, ONGC, Tata Motors, JSW Steel, IndusInd Bank, and Ultratech Cement missed  estimates.

Despite the muted revenue and profit growth in the December quarter for Nifty firms, some analysts view Q3 earnings as an improvement over the previous quarter, which was significantly weaker.

According to Deven Choksy of DRChoksey FinServ, the first half of this fiscal year has been particularly challenging due to three key factors: the Lok Sabha elections, state elections, and the monsoon season. These disruptions led to an economic slowdown, limiting business opportunities, and affecting corporate earnings

In its latest report, Motilal Oswal Securities stated that Q3 earnings aligned with modest expectations even as forward earnings revisions have been the weakest in recent times, with downgrades far outpacing upgrades, especially in the non-Nifty 50 segment.

The domestic broking firm is of the view that the Nifty 50 is expected to post a modest five percent earnings per share growth in FY25, following a compound annual growth rate of over 20 percent during FY20-24. Weakness in consumption and a drag from commodities have put pressure on earnings, even as banking, financial services, insurance, healthcare, capital goods, and technology sectors have reported strong performance, it said.

Prior to the start of the Q3 earnings season, most analysts had forecast continued slow growth for companies in the December quarter, with only a few sectors expected to report robust earnings.

Most broking firms predicted that top-line growth for companies will remain subdued for the seventh consecutive quarter with the year-over-year (YoY) margins expected to face pressure, resulting in the third consecutive quarter of sub-10% YoY profit growth.

Many firms are expected report weaker performance, with government spending remaining subdued in the first half. As of December 2024, capital expenditure stood at 62 percent of the budgeted estimates. However, analysts anticipate an acceleration in government spending in the coming months, which could drive earnings recovery for select firms.

The information technology sector delivered mixed results, though all four major firms -- TCS, Infosys, Wipro, HCL Tech -- reported strong deal wins, indicating an improvement in discretionary spending. Margins improved due to higher utilisation and lower attrition.

In the banking sector, credit strain persisted from the first quarter of last year, particularly in credit card, personal loan, and microfinance portfolios. The high cost of deposits impacted net interest margins. However, some mid-cap public sector banks posted better-than-expected numbers.

The pharmaceutical sector saw strong revenue growth driven by robust export demand, while margins improved due to lower input costs. Diagnostic companies continued their recovery as the price war subsided, allowing for minor price increases.

Telecom revenues grew, supported by the delayed impact of tariff hikes and increased rural penetration. The automobile sector also showed decent revenue growth, aided by festive demand and a better product mix, with two-wheeler companies performing particularly well.

The fast-moving consumer goods sector struggled due to subdued demand, despite price hikes, as input costs remained elevated. However, premiumisation trends continued to offer some margin support. The real estate sector posted encouraging numbers, driven by strong pre-sales, better execution, rising realisations, and declining inventory levels.

Oil marketing companies with a higher focus on marketing performed well, benefiting from strong marketing and refining margins. In contrast, the steel sector witnessed a decline in revenue and margins due to an influx of Chinese imports affecting prices. Meanwhile, cement sector revenue grew marginally, constrained by a high base and lower realisations.