Early-bird results for the January-March 2025 quarter (Q4FY25) suggest a slowdown in earning growth for India Inc, despite a benign cost environment that has led to an improvement in margins.

Illustration: Dominic Xavier/Rediff

The combined net profit (adjusted for exceptional gains and losses) of 175 early-reporting companies rose by 3.8 per cent year-on-year (Y-o-Y) in Q4FY25, marking the slowest growth in 17 quarters.

Net sales grew by 8.5 per cent, slightly better than the 8.1 per cent Y-o-Y growth rate in Q3FY25, but a sharp decline from the 11 per cent in the March quarter of FY24.

This was the slowest March quarter in revenue growth terms for early-bird companies in at least four years.

By comparison, operating expenses for these companies increased by just 2.3 per cent Y-o-Y in Q4FY25.

This was driven by modest single-digit growth in raw materials and employee costs, suggesting a relatively benign cost environment.

Operating profit (Ebitda or earnings before interest, taxes, depreciation, and amortisation) grew by 11.7 per cent Y-o-Y in Q4, while operating margins as a percentage of total revenue expanded by 190 basis points Y-o-Y in the same period.

Early bird companies posted a combined net profit of around Rs 1.19 trillion in Q4FY25, up from Rs 1.15 trillion in Q4FY24 and Rs 1.14 trillion in Q3FY25.

Their combined net sales reached Rs 9.46 trillion, compared to Rs 8.71 trillion a year earlier and Rs 8.93 trillion in Q3FY25.

The Ebitda margin expanded to 32.4 per cent of total revenues in Q4FY25, slightly down from a record high of 33.7 per cent in Q3FY25 but still the second highest in the past 18 quarters.

The early bird sample primarily reflects the earnings trends of private sector lenders and IT services companies, including HDFC Bank, ICICI Bank, Axis Bank, Tata Consultancy Services, Infosys, and Wipro.

These two sectors together account for 69 per cent of the combined net profit and 52 per cent of the combined net sales (or gross interest income) of all early reporting companies.

The banking, financial services, and insurance (BFSI) sector saw a sharp slowdown in earnings and revenue in the quarter under review.

However, the sector still outperformed expectations despite the slowdown.

The combined net profit of 44 BFSI companies in the sample rose by 4.9 per cent in Q4FY25, the slowest growth since Q1FY22.

BFSI companies  combined net sales (or gross interest income) grew by 9.6 per cent Y-o-Y in Q4FY25, the slowest in the past 14 quarters.

However, top private sector lenders ICICI Bank and HDFC Bank were the largest contributors to overall earnings growth in Q4FY25, accounting for 44 per cent and 25 per cent of the incremental earnings growth, respectively.

Hindustan Zinc followed with a 21.3 per cent share in the incremental growth.

ICICI Bank’s net profit rose by 18 per cent Y-o-Y to Rs 12,630 crore in Q4FY25, while HDFC Bank’s net profit grew by 6.7 per cent year-on-year to Rs 17,616 crore.

Excluding BFSI, the combined net profit of early bird companies rose by 3 per cent Y-o-Y in Q4FY25, slowing from 4.7 per cent growth in Q4FY24 and 10 per cent growth in Q3FY25.

This marked the third-worst performance for these companies in the past 17 quarters.

Non-BFSI companies posted combined net sales growth of 8 per cent Y-o-Y in Q4FY25, the fastest pace in the past three quarters, up from 7.4 per cent growth in Q4FY24 and 6 per cent in Q3FY25.

Operating margins for these companies rose by 11 basis points Y-o-Y to 20.7 per cent of revenues in Q4FY25, the most in the past 15 quarters.

Non-BFSI companies reported a combined net profit of Rs 68,827 crore in Q4FY25, up from Rs 66,799 crore a year ago and Rs 65,464 crore in Q3FY25.

Combined net sales grew to Rs 6.48 trillion from Rs 6 trillion in Q4FY24 and Rs 6.1 trillion in Q3FY25.

IT services companies, the second-largest contributor to the sample, reported a further slowdown in earnings growth in Q4FY25, while their revenue growth improved but remained in single digits.

Combined net profit for IT services companies rose by 1.8 per cent Y-o-Y to Rs 31,989 crore in Q4FY25, the slowest growth since Q4FY23.

In comparison, their combined net sales grew by 6.1 per cent year-on-year to Rs 1.99 trillion in Q4FY25, an improvement from 5.3 per cent growth in Q3FY25 and the fastest growth in the past seven quarters