After a disappointing September 2024 quarter, in which aggregate net profits for India Inc barely grew, companies are expected to turn in a better performance for Q3FY25. Earnings season comes against the backdrop of a slowing economy characterised by weak consumer demand and modest increases in investments. Among the key factors that would have influenced the financial results of businesses for the three months to December are the sales in the festival season, the depreciation in the currency and the sharp slowdown in loan growth.
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Net profits for the Nifty50 companies are tipped to grow at 9% y-o-y on the back of a 4.3% rise in revenues, according to Kotak Institutional Equities (KIE). For the BSE 30 set of companies, net profits are estimated to increase by 7.2% y-o-y on the back of a rise in sales of 5.7% y-o-y. Operating profits for both sets of companies are expected to grow slower than the net profits, suggesting that the bottom line would be boosted by other income.
The sectors that are expected to report only a single-digit net profit growth or a fall in profits include automobiles, banks, cement, consumer staples and metals. The sectors that are expected to fare relatively well, posting high double-digit earnings increases, are capital goods, pharmaceuticals, real estate, telecom and non-banking financial companies.
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The muted consumer demand, especially in urban India, is understood to have left volume growth at FMCG players subdued. While sales of automobiles are believed to have been hurt by an inferior product mix and bigger discounts in December, banks have done less business as reflected in the slower credit growth. The software services sector is expected to put up only a modest show; most IT firms should report an acceleration in growth rates y-o-y, but sequentially, the growth could be lower. Nonetheless, the number should be better than in FY24.
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