With global headwinds and ongoing elections, it is not surprising that India Inc’s profit growth slowed in the fourth quarter of FY24 after racing along in the preceding nine-month period. But there were some positives. This newspaper’s analysis of results from 1,084 listed companies showed that aggregate revenue growth for these firms improved sequentially to 10.6 per cent year-on-year in Q4 FY24, from 10.1 per cent in Q3 and 7.9 per cent in the first two quarters.

This is indicative of an improvement in the demand environment. Net profit growth slowed to 16.5 per cent for the latest quarter from 29.4 per cent in Q3 and 51 per cent and 63.4 per cent in the first two quarters of the fiscal. But this is not bad, given the high base effect. Operating profit margins held firm despite elevated power and fuel costs. Rising interest rates do not seem to have made any dent in companies’ debt servicing ability, with non-financial firms improving their interest cover to over five times.

A break-down of aggregates offers insights on what’s transpiring in the economy. One, financial firms played a key role in lifting both revenue and profit growth at the aggregate. Without the 25 per cent revenue growth and 27 per cent profit growth logged by BFSI (banking, financial services and insurance) firms, revenues and profits for India Inc would have expanded only by 6.2 per cent and 9.7 per cent, respectively. But since banks and financial firms have been piggybacking on robust credit offtake, the outlook on credit-fuelled consumption and industrial activity looks bright. Two, demand growth showed signs of getting broad-based, with participation from both goods and services. Consumer durables (24 per cent revenue growth in Q4), e-commerce (41 per cent), automobiles (15 per cent) and real estate (25 per cent) logged big numbers, right alongside hotels (15 per cent), financial services (49 per cent) and entertainment (31 per cent). However, muted growth in FMCG suggests that the rural leg of consumption is still lagging. Though elections usually slow the pace of government spending and capex, infrastructure (15 per cent), engineering (143 per cent) and capital goods (17 per cent) grew at a fair clip this quarter. The flagging segments this time around were commodity firms (refineries, mining, metals, steel) and export-dependent sectors such as IT services, chemicals and readymade apparel, which either contracted or grew in single digits.

Looking ahead, a normal monsoon aided by La Nina can lift rural consumption. The end of political uncertainty should see a further pickup in capex and infrastructure. However, prices of industrial metals have spiralled upwards in recent months on supply tightness. This could pressurise margins for India Inc. Banks and financial firms are facing margin challenges from tight liquidity. Even so, an overall 10-15 per cent profit growth appears feasible for FY25. Whether this will satisfy over-optimistic markets and justify the Nifty50 price-earnings multiple of 22 times, is what needs to be seen.