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<\/p>\nThe Q1FY24 earnings season has started on a dismal note for corporate India.<\/p>\n
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The early-bird companies’ revenue growth has been at a 10-quarter low, while the combined earnings of non-BFSI (banking, financial services, and insurance) companies seem to have hit the ceiling.<\/p>\n
The numbers suggest corporate India is entirely dependent on BFSI companies and the IT services sector to drive growth in revenue and profit while other sectors are showing signs of stagnation.<\/p>\n
BFSI and IT were the only sectors that reported earnings growth in the first quarter.<\/p>\n
The 220 early-bird companies in the Business Standard<\/em> sample accounted for nearly a third of the combined market capitalisation of all listed companies.<\/p>\n The combined net profits (adjusted for exceptional gains & losses) of all 220 early-bird companies were up 10.7 per cent YoY to Rs. 96,418 crore in Q1FY24 from Rs 87,107 crore a year ago.<\/p>\n However, the entire gain in earnings was accounted for by big private-sector banks such as HDF Bank and ICICI Bank and top IT services firms such as TCS, Infosys, HCL Tech, and Wipro.<\/p>\n Some prominent non-BFSI and non-IT companies in the sample include Reliance Industries, Hindustan Unilever, JSW Steel, Vedanta, Hindustan Zinc, Ultratech Cement, Havells India, DLF, United Spirits, and Tata Communications.<\/p>\n Excluding these, the combined net profits of 144 early-bird companies ex-BFSI and ex-IT were down 8.3 per cent year-on-year (Y-o-Y) to Rs 31,697 crore in Q1FY24 from Rs 34,560 crore a year ago.<\/p>\n With this, the combined net profits of these 144 companies have now contracted for four consecutive quarters on a Y-o-Y basis.<\/p>\n For comparison, the banks’ combined net profits were up 30 per cent Y-o-Y in Q1FY24, an improvement from the 24.1 per cent in Q4FY23.<\/p>\n Similarly, the combined net profits of the IT companies were up 12.8 per cent in Q1FY24, better than the 11.6 per cent in Q4FY23.<\/p>\n The banks and IT services firms together accounted for 65 per cent of the combined net profits of all early-bird companies in the sample.<\/p>\n The numbers suggest the quarterly net profits of non-BFSI companies have hardly grown in the last 10 quarters (from Q4FY21) and have moved around Rs. 58,000 crore during this period without any directional change.<\/p>\n The 166 non-BFSI companies in the sample reported combined net profits of Rs 57,948 crore in Q1FY24, up marginally from the Rs 57,840 crore in Q1FY23 and Rs 54,640 crore in Q1FY22.<\/p>\n According to analysts, poor earnings growth in the non-BFSI and non-IT space and the continued slowdown in revenue growth raise questions for corporate earnings in FY24.<\/p>\n From a long-term perspective, the biggest drag on corporate earnings is the continued slowdown in revenue growth.<\/p>\n Combined net sales (gross interest income in the case of BFSI companies) of all 220 companies were up 9 per cent Y-o-Y in Q1FY24, the slowest in the 10 quarters.<\/p>\n In comparison, these companies’ combined net sales were up 31.8 per cent Y-o-Y in Q1FY23 and 12.2 per cent Y-o-Y in Q4FY23, respectively.<\/p>\n The slowdown in revenue is more prominent in the non-BFSI and non-IT space.<\/p>\n The combined net sales of the non-BFSI companies were up just 2.9 per cent Y-o-Y in Q1FY24, down sharply from the 38.3 per cent in Q1FY23.<\/p>\n On the other hand, the combined net sales of the non-BFSI and non-IT companies were flat, their worst showing since Q3FY21 quarter.<\/p>\n There is a possibility that the earnings trajectory will change because big industrial companies such as Tata Motors, Tata Steel, Larsen & Toubro, NTPC, Mahindra & Mahindra, Maruti Suzuki, Oil and Natural Gas Corporation, and Indian Oil Corp declare their results for Q1FY24.<\/p>\n