September quarter shows double-digit profit growth across key sectors

Synopsis

Indian companies are showing robust profit growth, with a double-digit year-on-year increase in net profit for the fourth consecutive quarter. While sectors like oil, gas, and retail are performing well, banking, finance, and IT are lagging. Analysts anticipate a multi-quarter earnings upcycle, boosted by economic stimuli and policy measures.

ET Intelligence Group: The early trend in September quarter results shows that companies have continued to clock a double-digit, year-on-year increase in aggregate net profit and high single-digit growth in net sales. Select companies from sectors including oil and gas, steel and retail have followed this trend while sectors including banking and finance and information technology (IT) have been laggards. For a sample of 251 companies that have declared results so far, net sales and net profit have risen by 9% and 12%, respectively, from the year earlier.

It's the fourth consecutive quarter of double-digit profit growth while top-line expansion has once again inched closer to 10% after dipping to 6.25% in the previous quarter. In the year-ago period, sales and profit grew by 7.8% and 4.5%, in that order.

The total sample's margin has remained flat at 21% compared with the year-ago level, though it has dropped below 22% for the first time in four quarters, reflecting the impact of the lending sector's shrinking profitability. Excluding banks and finance companies, the operating margin of the remaining sample improved by 160 basis points year-on-year to 17.6%.

Agencies

Slower Growth in IT

In addition, the profit growth of the truncated sample improved to 16.8% in the September quarter.

The share of the banking and finance sector in the total sample's net profit shrank to 45.4% from 53.6% in the year-ago quarter. The IT sector has also reported slower net profit growth of 3.7% in the September quarter compared with 10.9% growth a year ago. The sector has been facing slower project ramp-ups amid uncertainties pertaining to US tariffs.

At the beginning of the current earnings season, analysts had predicted a gradual uptick helped by macroeconomic stimuli in the form of rationalisation of GST and the Reserve Bank of India's liquidity push.

Elara Capital expected the first double-digit profit growth in six quarters for the companies under its coverage, driven by sectors including cement, real estate, metals and energy. "GST and income-tax cuts, together with impending monetary easing, reinforce visibility for a multi-quarter earnings upcycle," the broking firm said in a preview.

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