Q4 earnings watch: Companies shrug off headwinds to pocket more profit per rupee
In the fifth part of our series on Q4FY25 earnings, we examine the gradual improvement in profit margins across India Inc., with disparities in recovery patterns between different sectors and companies.
Indian companies maintained robust profit growth last fiscal year, even as revenue expansion remained muted amid market volatility and geopolitical uncertainties over the past six months.
Margin pressures eased consistently throughout fiscal year 2024-25 and both operating profits and net profits rose as a share of revenue gradually across all four quarters, showed a Mint analysis of 329 BSE-listed companies.
The analysis, based on standalone numbers sourced from the Capitaline database of listed companies that have declared results for the quarter ended March, shows operating margins rose to 28.8% in the fourth quarter from 26% in the first quarter, while net profits climbed from 9.6% to 11.2% during the period. The improvement was achieved through cost controls, better pricing or operational efficiency despite muted volume growth.
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But only a few truly aced it completely. A detailed company-wise analysis of net profit margins showed that 26 of the 329, or only 8% companies, managed a consistent recovery in margin over the four quarters of 2024-25.
For instance, Mukesh Ambani-led Reliance Industries Ltd was the only large-cap company that reported a consistent rise in net profit margins across all the four quarters. Pharma-focused Laurus Labs Ltd, engineering products firm Skipper Ltd and Himadri Speciality Chemical Ltd were among the other companies that saw their profitability improve.
Conversely, about 21 companies recorded a consistent decline in the net profit margins during this period, signalling a persistent margin pressure among a few.
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However, the sectoral performance painted a more nuanced picture, even as aggregate margins showed recovery.
While maintaining impressive double-digit profit margins, information technology (IT) services and construction and real estate sectors saw margins decline over a year earlier in Q4. Large deals provided top-line support for the IT services companies in Q4 but could continue to exert pressure on margins, analysts at JM Financials wrote in a recent report.
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The fast-moving consumer goods (FMCG) and automotive and ancillaries industries displayed some resilience amid a persistent subdued demand environment. Their net profit margins stayed stable or flat as some consumer staples companies balanced high commodity prices with cost controls.
Among the sectors that performed well, metals and mining, travel and hospitality and pharma and healthcare reported a significant improvement, with margins rising by about 450-550 percentage points over the last fiscal.
This is the fifth part of a series of data stories about the ongoing Q4 earnings season. Read the full series here.
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