Indian corporate revenue surges 19.4 percent in first quarter as margins tighten
Indian companies recorded their strongest top-line expansion in nine quarters during the June period, but soaring raw material expenses and a weak energy sector constrained overall profit growth for investors.
A broad sample of 3,589 Indian companies reported a 19.4 percent jump in revenue for the June quarter, marking the most robust top-line expansion in nine quarters. However, net profit expansion decelerated to 11 percent, representing the slowest bottom-line growth in a year as rising input costs weighed on corporate earnings.
The earnings momentum was heavily skewed toward smaller enterprises rather than the largest listed entities. "Nifty 50 and Nifty 100 delivered EPS (earnings per share) growth of 11.0% and 8.3%, respectively, while the Midcap 150 and Smallcap 250 reported significantly stronger growth of 34.0% and 36.4% in that order," said Feroze Azeez, Joint CEO of Anand Rathi Wealth.
Financial institutions provided crucial support to the aggregate bottom line, masking deep vulnerabilities in other parts of the economy. When the lending sector is excluded, net profit growth for the broader sample contracted to just 5.4 percent. This weakness was primarily driven by the oil and gas sector, which suffered from increased fuel marketing deficits and expanding liquefied petroleum gas shortfalls caused by unpredictable global energy markets.
Removing the distorted energy figures reveals a healthier underlying profit expansion of 20.9 percent for the quarter, yet cost pressures remain a dominant theme. For non-financial companies, raw material costs relative to revenue climbed to 38 percent, the highest level in at least 13 quarters and well above the 33 to 35 percent range seen over the past three years.
"The June quarter margins remained under pressure due to elevated input costs though the impact was partially cushioned by the utilisation of lower-cost inventory," said Vinod Nair, Head of Research at Geojit Investments. He warned that this inventory benefit will likely moderate in the September quarter as more expensive stock flows through profit and loss accounts, while monsoon-related disruptions could create near-term headwinds for select industries.
Beyond financials, capital goods, healthcare, retail and jewellery companies delivered robust results, while automakers, cement producers, consumer goods manufacturers and energy firms faced notable pressure on their profitability. "The strong performance of sectors including financials and capital markets suggests continued strength in credit growth, asset quality and market activity," Azeez noted.
Looking ahead, market watchers anticipate a broader improvement in corporate finances, though global commodity prices will remain a decisive variable. Azeez projects earnings per share growth of roughly 13 percent for large-cap stocks, alongside a more vigorous 18 to 20 percent expansion for mid-cap and small-cap firms. "Overall, we remain constructive on the earnings outlook, while maintaining a selective approach based on valuations and earnings across sectors and market-cap segments," he said.
Nair expects ongoing infrastructure spending and capital expenditure to underpin corporate earnings in the coming months. "Nevertheless, premiumisation trends and seasonal demand from the festive and wedding periods are expected to provide support," he added. "However, commodity price volatility, inflation trends and geopolitical developments remain key monitorable," he concluded.
