Indian Companies Struggle with Earnings: What’s Next for FY25?

For three straight quarters in the fiscal year 2025, Indian companies have been struggling to make money. It looks like the fourth quarter won’t be any different, making this year forgettable due to slow growth and shrinking profits. Most experts predict that the earnings of Nifty companies will only grow by about 1-2% compared to last year, which is disappointing.

Banks are particularly feeling the pressure because their earnings from interest are going down. Other sectors like commodity chemicals, consumer goods, oil, and gas also expect weak results. But there’s a bright spot: sectors like diversified financial services, healthcare, metals, and telecom are expected to do well, with strong profit growth.

The main reason for reduced profit is that companies aren’t making enough money from sales. For example, one brokerage, Nuvama, expects that overall revenue will only grow by around 6% this quarter. This slow revenue growth is putting more stress on profits.

Some companies are doing exceptionally poorly. A report from Motilal Oswal says that 60 companies could see their profits drop by double digits in the fourth quarter, with a few facing an 84% fall in profits!

Focusing on specific sectors, the automotive industry is only expected to grow by 1% in profits during January-March 2025. Companies like Apollo Tyres may experience a profit drop of 44%, and others in the sector could see drops of up to 35%. The revenue from automotive makers might see a small growth of 5% due to slight rises in production.

In the cement industry, profits may fall by 14%. Companies like Shree Cement and Ambuja are predicted to do badly as well. Consumer goods companies like Godrej and Tata may see profits drop by as much as 17%. Even though prices are increasing, sales growth has been low, with no major improvements in consumer demand.

Currently, after a recent drop in stock prices, the Nifty P/E ratio is now 20 times, which is a bit lower than its long-term average, making it cheaper to buy stocks, especially large ones. However, smaller companies are still seen as expensive. While challenges like global markets and a weak fourth quarter might make things bumpy in the short term, experts at Motilal Oswal still believe that India’s long-term growth story is strong.

Looking ahead, even though the fourth quarter is likely to be weak, analysts think that the market will start to focus on expected growth in FY26. This may be because FY25 had weak results, making it easier for improvement next year. Indian policymakers are also trying to boost demand to help the economy recover.

(Disclaimer: The views and opinions expressed are those of the experts and do not represent the views of Thellv.news)