Indian companies profit growth slows in FY25, capex weakens amid soft demand: Nuvama

The revenue progress of Indian companies slowed down within the monetary yr 2024-25, as gentle demand, weak top-line efficiency, and slowing capital expenditure weighed on general company efficiency, says a report by Nuvama Research.

In line with the report, the mixture revenue after tax (PAT) for firms within the BSE500 index (excluding Oil Advertising Firms) grew simply 10 per cent year-on-year in Q4FY25, and 9 per cent for the total FY25, down from a stronger 21 per cent progress recorded in FY24.

The report stated “Q4FY25 PAT progress for BSE500 (ex-OMCs) rose to 10 per cent YoY (Q3FY25: 8 per cent), although prime line stayed weak, on account of price rationalisation (wage invoice progress simply 5 per cent) and a low base”.

In Q4FY25, income grew 10 per cent from the identical quarter final yr, barely higher than the 8 per cent progress seen in Q3FY25. This was achieved primarily via cost-cutting measures, together with a modest 5 per cent progress in wage payments, and the advantage of a low base.

Whereas sectors like metals, telecom, chemical compounds, and cement posted improved income, segments comparable to public sector banks and industrials, which had led progress in FY24, noticed a slowdown.

The report additionally identified a big drop in capital expenditure (capex) progress. Regardless of sturdy working money flows, India Inc’s capex grew simply 6 per cent within the second half of FY25, in comparison with 20 per cent progress seen in FY23 and FY24.Whereas this cautious strategy is likely to be seen as constructive from a governance and valuation standpoint, it additionally displays weak demand circumstances and will pose dangers to future earnings.Mid- and small-cap (SMID) firms, which had underperformed large-cap firms for many of FY25, confirmed some revenue restoration in Q4FY25, supported by price management and a low base.

Nonetheless, for the total yr, their efficiency aligned extra intently with giant caps, after outperforming them in FY24.

The report described FY25 as a “yr of reconciliation” the place a number of developments from FY24 moderated. Income, revenues, and capex all grew by round 8-10 per cent, returning to pre-COVID developments.

Trying forward, the outlook for FY26 stays unsure. The report famous that earnings estimates for FY26 have been downgraded by 2 per cent, and one-year ahead earnings per share (EPS) projections have stagnated, much like developments seen earlier than the pandemic.

Nuvama stated the Road at present expects 15 per cent earnings CAGR for FY25-27, however flagged draw back dangers on account of weak demand, slowing credit score progress, company cost-cutting, and unsure export circumstances.

In abstract, FY25 marked a slowdown for India Inc, with all main monetary indicators reconciling with a subdued top-line efficiency, and the outlook for FY26 stays cautious.