The Nifty 50 firms’ earnings have been cut down by 7% over the last six months after a poor showing in the September quarter. As a result, the predicted earnings growth for FY25 has been reduced to just 5%, the lowest level since FY20. India Inc.’s operational earnings grew at the slowest rate in at least four quarters in Q2FY25, growing only 4% year over year (y-o-y).
The modest gain in EBITDA (profits before interest, tax, depreciation, and amortization) follows a 6% revenue growth. Operating profit margins for 2,626 businesses (not including banks, financial institutions, and oil marketing firms) decreased in Q2FY25 after increasing in the preceding three quarters.
According to the statistics, the market for IT services only slightly rebounded during the quarter, and consumption demand was poor. Due to the weakened earnings momentum, Citigroup strategists have downgraded from overweight to neutral.
Additionally, Jefferies, a brokerage firm, cut earnings predictions for around half of the companies it covers. The raw materials-to-sales ratio rose by 22 basis points year over year for the aggregate sample, indicating that higher input costs were not covered by the moderate increase in revenues for many enterprises. Some businesses saw a decline in their margins as a result of input costs, while others had to make expenditures to compete.
Tata Steel’s consolidated sales have decreased 3.2% year over year, while Dalmia Bharat’s have decreased 2.1% and Tata Chemicals’ have decreased 0.8%. Exports were hurt by lower volumes at JSW Steel. Since the average selling price was lower due to a weaker model mix, Eicher Motor’s revenues grew by 4% year over year. Ashok Leyland’s revenues decreased 9% year over year due to a significant decline in volumes. Once more, net sales at Dabur India decreased 5% year over year, while Hindustan Unilever’s revenues increased by only 3%. Tata Power’s top line decreased 1% year over year.
Given that rural demand has not yet fully recovered and urban demand has been lagging, consumer companies have had difficulty pushing through volumes. Businesses that performed well include Larsen & Toubro, a major player in engineering, which reported a 21% year-over-year increase in revenue, and Dr. Reddy’s Laboratories, whose sales increased 16.5%. Others, such as Mahindra & Mahindra, also performed well, reporting a 13% year-over-year gain in standalone net revenue, but primarily due to price hikes rather than volume growth.
