India Inc, reported a revenue/PAT growth of 10/16 per cent year-on-year (y-o-y) in the fourth quarter of FY24 based on the results reported by 1,084 companies till May, 17, 2024. Excluding the BFSI sector, the growth normalises to 6/10 per cent y-o-y

Compared to 3 and 55 per cent y-o-y average revenue and PAT growth in nine months of FY24, the earnings juggernaut seems to have “returned to mean”.

Based on the Q4 numbers, as well as the performance in the last two years, India Inc’s story in FY25 will be a more organic and bottom-up narrative that is bereft of secular growth drivers.

If FY23 was led by demand recovery psot Covid but interrupted by high inflation, FY24 saw the reversal of that as topline slowed but commodity price cool-off pushed bottomline growth.

Companies in FY25 will have to revert to leveraging a strong balance-sheet to capture volume recovery which only began to show in Q4.

Sectors on the rise

Banks and automobiles continue their run of strong, fundamentals driven growth. Banks have reported a 26 per cent y-o-y revenue and PAT growth in Q4. Despite deposit repricing getting reflected in P&L, credit growth, credit cost and NIM continue to remain healthy, but can face high base in FY25.

Despite automobiles’ revenue growth ‘slowing’ to 15 per cent y-o-y, the PAT growth at 94 per cent shows no slowing. Strong growth in realisation, adding to volume growth is a tailwind for the sector. The two-wheeler market has seen a demand recovery, which can imply a rural recovery though not corroborated by FMCG commentary.

The surge in demand for power, the lower cost of coal, and favourable regulation (tariff clarity and lower transaction costs) continue to aid generation and transmission companies. The capacity expansion has also contributed to growth in revenues and may amplify going forward with the segment reporting 18 per cent y-o-y revenue growth in Q4.

Other sectors

Pharmaceuticals’ renewed momentum in the US has been offset by the volatility in IPM (Indian Pharma Market) growth which has fallen to 6 per cent y-o-y. The segment reported 8 per cent y-o-y topline growth but owing to lower cost of APIs and strong product mix, the PAT rose 24 per cent y-o-y.

The lower cost of coal is benefiting cement (9-11 per cent y-o-y revenue and PAT growth in Q4) and steel (1-16%) companies, leading to the lowest power and fuel expenses as a percentage of sales and higher margins. However, cheap Chinese steel imports continue to impact realisations. FMCG, the first barometer of rural recovery (6-9%), shows no signs of a turnaround. Rural volume recovery remains unconvincing, with hopes pinned on the post-election scenario. High competition is hurting pricing, though marginal operating leverage has been achieved through overall volume growth.

IT, with its low single-digit revenue growth and guidance, continues its difficult run. The segment reported 3/9 per cent y-o-y revenue/PAT growth in Q4. India Inc’s six per cent revenue growth (ex-BFSI) and 100 bps gross margin expansion led to a 10 per cent y-o-y PAT growth in Q4, despite the high base from lower commodity prices. Positively, the ability to raise capital remains strong, with an interest coverage ratio at a peak of 5 times despite high borrowing costs. Capex additions in auto, cement, steel, and chemicals continue at a steady pace, driving core sector growth.