Accelerating sales and decelerating profits mark Q4 for India Inc in FY24, finds study
The numbers also exhibit a skewed contribution of different segments in revenue and profit growth during the last quarter of FY24
Acceleration in sales and deceleration in profits have come to describe India Inc’s fortunes in the January-March (Q4) quarter, the Business Standard has reported.
The numbers also exhibit a skewed contribution of different segments in revenue and profit growth during the last quarter of FY24. A substantial part of the gains in net sales and net profit originated from BFSI (banking, financial services, insurance) companies and automobile manufacturers.
Coming to specific businesses, the highest contributor to profit growth came from Tata Motors which accounted for 39% of the cumulative incremental growth in overall corporate profit in Q4 of the last financial year. The companies to follow the Tata company were State Bank of India (13.1% contribution to incremental profits), Axis Bank (8.1%) and Punjab National Bank (6%).
If revenue is considered, the top contributors were Reliance Industries with incremental net sales growth of 10.9%, SBI with 8.3% and Tata Motors with 6.5%.
The report was based on a sample of 631 companies listed in the Indian market. The cumulative net sales rose by 10.1% (y-o-y) in Q4 of FY24, which was 70 basis points higher than the rate of growth sequentially ie, the rate of growth in Q3 of FY24. It was also the highest in the past four quarters. In the case of banks and lending entities gross interest income was taken into account in place of sales.
But the aggregate net profit (adjusted for exceptional gains & losses) of these companies was up 13.4% (y-o-y) in Q4, which was a sharp deceleration from the 24.2% recorded in Q3. This rate of growth of net profit was also the slowest in the past six quarters.
If non-financial companies were kept out of the study, the rise in profits fared even more poorly. The combined adjusted net profit of the businesses other than BFSI entities stood at 7.5% (y-o-y) in January-March quarter. This rate was about one fourth of the 33.5% growth achieved in Q3. The Q4 profit growth was also the poorest in the past five quarters.
The cumulative profit of ex-BFSI and oil & gas companies rose by 21% (y-o-y) in Q4 of the last financial year. This basket of businesses, too, achieved a sharper rate of growth of profits (26.5%) in Q3 of FY24 and the Q4 numbers marked their poorest show in the past four quarters.
The total net profit (adjusted for exceptional gains & losses) of all 631 companies increased to about Rs 2.6 lakh crore in the January-March quarter of FY24 from Rs 2.29 lakh crore in Q3 FY24. The figure for cumulative net profit for these companies in Q4 of FY23 was Rs 2.29 lakh crore. Against this figure, the total net profit of 496 ex-BFSI companies rose to about Rs 1.5 lakh crore in Q4 of FY24 from around Rs 1.32 lakh crore in Q3 of FY24 and around Rs 1.4 lakh crore in Q4 of FY23 (ie, the corresponding quarter a year ago).
The numbers also show a large variance in revenue growth across different sectors. The combined net sales of ex-BFSI companies grew 6.3% (y-o-y) in Q4 of FY24. It marked an improvement from the 4.9% recorded in Q3 of FY24 but a contraction from the 12.3% growth achieved in Q4 of FY23. But is ex-BFSI and oil & gas companies are considered, the total net sales was found to rise 8.4% (y-o-y) in Q4, a climb down from 8.9% growth in Q3 of FY24. Worse, it marked the slowest pace of growth in the past 13 quarters. This, the report said, was an indication of the slowdown in demand in the core manufacturing and services sector.
The gains in overall revenues and net profit were largely contributed by the automobile manufacturers and the BFSI sector. The BFSI sector contributed about Rs 20,100 crore to their cumulative net profit in Q4 of FY24.
The combined bottom line of all listed companies in the sample rose Rs 30,600 crore (y-o-y) in the January-March quarter in FY24. BFSI companies also accounted for 54% of the overall growth in net sales in Q4 of FY24.
“The corporate earnings scorecard for Q4FY24 has been in line so far with 70% of our coverage universe either meeting or exceeding profit expectations. However, growth has primarily been led by the BFSI and automobile sectors,” Motilal Oswal Financial Services mentioned in its interim review of profits of Q4 of FY24.