Corporate Earnings: India Inc Sees Sales Growth Dip In Q4FY24

While shedding light on the corporate performance, a report by the Bank of Baroda (BoB) has revealed that the Q4FY24 financial performance of India Inc. continued to be marked by a moderation in sales growth, even as profit growth picked up when compared with last year.

The bank analysed the financial performance of 2537 companies which suggested that sales growth moderated from 10.2 per cent in Q4 FY23 to 7.8 per cent in Q4 FY24. Expenditure growth remained stable at 7.5 per cent. 

“This was also reflected in a significant improvement in profitability. All major profit indicators witnessed an improvement led by lower input prices as global commodity prices were elevated in Q4 FY23,” according to the report.

Banks and the auto sector remained the outperformers and contributed to most of the growth in both sales and profits. This was similar to the trend witnessed in the last three quarters of the year. The FMCG sector still awaits a meaningful recovery in demand, with many companies resorting to a volume-led approach by undertaking price cuts.

On the positive side, there is some momentum in sectors such as textiles and consumer durables. Improvement in external demand should also aid the performance of other export-oriented sectors. However, companies are likely to struggle to maintain margins as global commodity prices have stabilised. 

Further, demand for capex-linked sectors is likely to be curtailed due to elections and monsoon. An expected recovery in rural demand should provide some comfort. The BoB report added, “Overall, we believe that corporate performance in FY25 could be marked by higher volume growth given stable growth conditions in the economy.”

The outlook is heavily contingent on the monsoon trajectory, with both timing and distribution of rainfall likely to play an important part in the revival of the FMCG sector. It added that headwinds are likely to emerge in FY25 with the positive base effect from lower commodity prices waning. This may impact profitability going ahead.