India Inc (ex-financial services firms) has seen a dip in net sales based on the results of 635 companies in the first quarter of FY24. As per data from the CMIE, the cumulative sales of 635 non-financial companies have come off 2.82% to ₹13.91 lakh crore. Incidentally, the country's largest company by revenues, Reliance Industries, reported a 4.69% decline in revenues to ₹2,31,132 crore even as its net profit fell 10.8% to ₹16,011 crore.
But what stands out is that the cumulative profits (net of prior period income and extraordinary income) of these companies have zoomed 62% to ₹1.32 lakh crore, largely on the back of an 11.85% drop in operating expenses to ₹11.53 lakh crore. A notable drop is in the cost of raw materials which fell 18% to ₹7.98 lakh crore even as salaries and wages increased 12.92% to ₹1.20 lakh crore. For instance, FMCG behemoth, Hindustan Unilever's gross margin during the quarter was up 251 basis points at 49.9%. However, an ad-spends increase of 9.9% (as percentage of sales), higher employee cost of 9% and other cost increase of 20.2% resulted in 8.4% growth in operating profit to ₹3,521 crore, while the EBITDA (earnings before income, tax, depreciation and amortisation) margin stood at 23.2% (up 49 bps). Similarly, Bajaj Auto's operating profit for the quarter was up 51% to ₹1,954 crore. The company in its exchange filing attributed the performance to dynamic pricing versus cost management, aided by foreign exchange realisation, and operating leverage. The impact of India Inc's deleveraging spree was also evident in the interest outgo that stood at a meagre ₹26,666 crore, a marginal drop of less than 1% even as total tax provisions increased nearly 50% to Rs 43,455 crore during the quarter.
Of the 194 financial services companies results reported by the CMIE, total income increased 28% to ₹39.24 lakh crore during the quarter, while PAT (net of prior period income and extraordinary income) was up 51% to ₹65,649 crore. One of key reasons for the financial sector's performance, according to Motilal Oswal Financial Services, is because banks' earnings growth has remained steady even as margin trajectory turned for several banks (barring Union Bank that posted a 15bp QoQ expansion). Though the State Bank of India is yet to announce its results, the country's leading private sector lender, ICICI Bank, saw a 39.7% jump in net profit to ₹9,648 crore during the quarter as its asset quality improved on a sequential basis. The overall asset quality in the financial sector has continued to improve with special mention account (SMA) and restructured pool under control. Even for NBFCs, despite Q1 historically being a seasonally weak quarter, vehicle financiers demonstrated healthy disbursement momentum, driven by strong underlying demand and sectoral tailwinds, states MOFSL.
An analysis of the results of 33 companies, which account for 77% weightage in the Nifty 50 universe, reveal a 43% year on year (YoY) jump in cumulative profit, led by Tata Motors, BPCL, HDFC Bank, ICICI Bank and Axis Bank. These five companies have contributed 93% to the incremental YoY accretion in earnings. "Only nine companies in Nifty have reported profits below our expectation, while 12 have recorded a beat and 12 have been in line," mentions the report. Tata Steel, Reliance Industries, and UPL were the biggest drag on Nifty earnings.
