In the final quarter of FY24, corporate profitability showed notable improvement, driven largely by the Financials and Consumer Discretionary sectors. Net revenue growth for and Nifty500 companies was 10.2% and 9.9% year-over-year (YoY) respectively, fueled by strong credit demand and robust auto sales. These sectors contributed 76% and 73% to the overall revenue growth of Nifty50 and Nifty500 companies.
For the entire fiscal year, however, the growth was more subdued, with net revenue increasing by 9.3% for Nifty50 and 7.9% for Nifty500 companies, a significant drop from the previous year’s growth rates of 23% and 29.6%. Despite this, operating profit growth outpaced revenue growth, with Nifty50 and Nifty500 companies seeing increases of 10.7% and 12.2% YoY respectively. This was achieved despite higher salaries and other operating expenses, leading to substantial margin improvements.
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Adjusted net profit (PAT) growth was particularly strong in Q4FY24, with Nifty50 companies experiencing a 21.5% rise and Nifty500 companies seeing a 17.9% increase. Over the full fiscal year, PAT growth for Nifty50 was 27%, while Nifty500 saw a 33% increase. Notably, Financials and Consumer Discretionary sectors were major contributors, accounting for 90% of the earnings growth in both indices. Excluding these sectors, PAT growth was modest at 3.4% for Nifty50 and 2.9% for Nifty500 in Q4FY24.
Export-oriented sectors such as Information Technology and commodity companies in Materials and Energy faced challenges due to weak external demand. Consumer Staples also struggled with lagging rural demand. In contrast, domestic cyclical sectors like Financials, Industrials, and Consumer Discretionary drove overall earnings, supported by resilient urban consumption, government capital expenditure, and improving private investment.
Looking forward, consensus earnings estimates for the top 200 companies by market capitalization show modest increases of 0.1% for FY25 and 2.3% for FY26 since March 2024. This implies expected profit growth of 10.9% in FY25 and 16.7% in FY26, following a robust 34.5% growth in FY24. Financials and Materials are projected to contribute nearly 52% of the incremental earnings for these companies over the next two years, despite comprising only 38.4% of overall corporate earnings in FY24.
The earnings growth outlook for FY25 is supported by resilient urban demand, a recovery in rural demand amid expectations of a normal monsoon, an improvement in external demand with the easing cycle, and sustained government capital expenditure. However, rising input costs could partially offset these positive factors.
Overall, the Q4FY24 earnings review underscores the critical role of Financials and Consumer Discretionary sectors in driving corporate profitability, while highlighting the challenges and potential headwinds facing other sectors. As companies navigate these dynamics, continued strong performance in key sectors will be crucial for sustaining overall growth.
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