India Inc is putting up a resilient show despite global headwinds and rising interest rates. An analysis by this newspaper of the Q3 FY24 numbers reported by 1,357 listed companies shows that they improved their revenue growth to 9.4 per cent in the October-December 2023 quarter, from 7.2 per cent and 7.3 per cent respectively in the preceding two quarters. Their net profit growth at 30.8 per cent slowed from 53.8 per cent as input cost benefits waned, but the absolute growth rate was well above historical levels. Despite rising interest rates, the interest coverage ratio of non-financial firms was comfortable at 4.4 times. But a sectoral break-down of the results reveals that revenue and profit growth for India Inc was powered by different sets of sectors.

In the last two quarters, weak revenue growth from some consumer-facing industries had raised doubts over whether the post-Covid surge in demand was losing momentum. Revenue numbers for the latest quarter, which captures festival season demand for 2023, allay such fears. Sectors such as consumer durables (24.3 per cent), new-age e-commerce (42 per cent), automobiles (21.7 per cent), retail (199 per cent), jewellery (23.6 per cent) and aviation (30.3 per cent) delivered strong sales growth, indicating that urban and big-ticket spending are in the pink of health. But weak sales growth for sectors such as FMCG (5.2 per cent) and ready-mades (0.7 per cent) suggests that spending on essentials remains sub-par, either due to a K-shaped recovery or a shifting share of the consumer wallet.

If consumer-facing sectors demonstrated strong revenue growth, core economy and industrial sectors reported a profit bounty. Large profit jumps in steel (310 per cent growth), cement (191 per cent), refineries (66 per cent), gas (135 per cent) and power (43 per cent) were the result of lower energy and freight costs, which may wane if global oil prices shoot up again. But for now, bumper profits in these capex-heavy sectors show that India’s large industrial companies are in good shape. This offers hope for private capex to regain momentum as and when capacity utilisation peaks. Banks and finance companies saw a slowdown both in revenues and profits thanks to regulatory speed-breakers, but revenue growth at 29 per cent was still suggestive of good credit availability. Listed realty companies reported a slide in revenues (5 per cent contraction) challenging the narrative on real estate recovery. Export-oriented sectors like IT services reported tepid revenue (7 per cent in Q2 to 3.7 per cent in Q3) and profit growth (4.4 per cent to 2 per cent).

There’s nothing in the Q3 earnings scorecard to disappoint bullish stock markets. But, as the Nifty50 is already trading at 20 times forward earnings when per share earnings are expected to grow at 13 per cent, there’s nothing to trigger bullishness either. Investors, especially those entering equities now, need to tone down their returns expectations.