Best of the Week | India Inc delivers a profit punch in Q4—who’s winning, who’s wobbling?

In the fourth quarter of FY25, India's corporate sector showcased resilience, with net profits rising over 12% year-on-year, despite a modest 2% increase in revenue. Excluding the banking, financial services, and insurance (BFSI) sector, profits surged by 14.3%, indicating robust margin expansion across various industries.

Key Drivers of Profit Growth
The profit uptick was primarily driven by:
1. Cost Management: Companies implemented effective cost-control measures, including leaner wage bills and operational efficiencies.
2. Pricing Strategies: Smart pricing adjustments contributed to improved margins.
3. Operational Agility: Enhanced operational agility allowed firms to adapt swiftly to market changes.

Operating margins improved steadily throughout the fiscal year, reaching 28.8% in Q4 from 26% in Q1. Net profit margins also increased from 9.6% to 11.2% during the same period. However, only 8% of companies managed consistent margin growth across all four quarters.

Sectoral Highlights-
Reliance Industries: The conglomerate reported a 6% year-on-year increase in consolidated profit for Q4FY25, reaching ₹22,434 crore. Revenue from operations rose nearly 10% to ₹2,64,573 crore. The telecom division, Jio, saw a 25.7% increase in profit after tax, while the retail segment experienced a 29.1% rise in net profit. However, the oil-to-chemicals segment faced a 10% decline in EBITDA due to weaker margins.

HDFC Bank: The bank's net interest margin (NIM) expanded by 2-3 basis points to 3.46% in Q4FY25, excluding a ₹700 crore income tax refund. Despite this, the bank anticipates pressure on margins due to the Reserve Bank of India's rate-cutting cycle. Approximately 70% of HDFC Bank's loans are on a floating rate basis, which may lead to a negative impact on NIM in the short term.

Conclusion
India Inc.'s performance in Q4FY25 reflects a strategic focus on cost optimization and operational efficiency, enabling companies to navigate economic uncertainties effectively. While challenges persist, the overall profit growth indicates a positive outlook for the corporate sector in the coming quarters.
*This news has been published on Mint on 3rd May 2025

 

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