Corporate India has demonstrated resilience in the fourth quarter of FY25, showcasing a commendable profit performance. Several factors have contributed to this positive trajectory, even amidst a complex economic landscape. While revenue growth has been moderate, strategic cost management, sector-specific tailwinds, and improved consumer sentiment have collectively boosted the bottom lines of many companies.
A recent analysis by Bank of Baroda of 1,787 companies listed on stock exchanges reveals that the profit after tax (PAT) grew by 9.2% in Q4 FY25, reaching Rs 3.43 lakh crore, compared to a 12.6% growth in the corresponding quarter of the previous fiscal year. While this indicates a slowdown in the pace of growth, the absolute profit figure signifies a healthy corporate sector. Sales for these companies also saw an increase of 5.7% to Rs 28.81 lakh crore.
Notably, excluding service sector companies, a focused analysis of 1,079 manufacturing companies showed an even stronger performance, with net profits increasing by 13.7% in Q4 FY25. This is a significant turnaround from the 2% degrowth experienced in the same period last year. This growth in the manufacturing sector highlights the impact of stable consumer sentiment, boosted by improving rural demand and mixed trends in urban areas.
Several key players have significantly contributed to this earnings growth. Bharti Airtel emerged as a frontrunner, accounting for nearly a third (32.5%) of the total increase in corporate profits. Indian Oil Corporation (IOC) and Hindalco also played crucial roles, contributing 13.3% and 9.4% respectively. The combined impact of these top five contributors accounted for a significant 73% of the total year-on-year growth in corporate earnings during the quarter. Specifically, Bharti Airtel's consolidated net profit surged 185.7% year-on-year, while Indian Oil and Hindalco saw increases of 57.8% and 66.3% respectively.
Different sectors have experienced varied levels of success. Mining and metals, pharmaceuticals, power, and public-sector oil-marketing companies have recorded double-digit earnings growth. On the other hand, BFSI (banking, financial services, and insurance), automobiles, IT services, and FMCG (fast-moving consumer goods) sectors have shown flat to low single-digit earnings growth. This divergence reflects the specific challenges and opportunities within each sector. For example, the FMCG sector experienced 4-6% revenue growth driven by price hikes, but volume growth remained subdued, with resilient rural demand offsetting weaker urban demand.
While the overall picture is positive, certain factors warrant attention. The pace of earnings growth has slowed compared to previous quarters, and a significant number of companies have faced earnings downgrades. Analysts at Motilal Oswal Financial Services noted that earnings downgrades outnumbered upgrades, leading to a broadly unchanged FY26E Nifty 50 earnings per share (EPS) estimate. This suggests that while the current performance is strong, future growth may be more moderate.
Looking ahead, experts predict a GDP growth of 6.8% in FY25. While there are expectations of revival in rural demand, factors such as a slowdown in government spending during elections and the monsoon season could pose challenges in the first half of the fiscal year. However, a potential pickup in the second half, driven by increased government spending, private capital expenditure, and improved rural demand, could further boost corporate earnings. Despite these positive projections, evolving global economic conditions and geopolitical uncertainties remain key factors to monitor.
