Mint Primer | Q1 earnings wrap: Green shoots, red lines

The first quarter results season is almost over, with companies navigating an environment marked by volatile costs, demand fluctuations and rising competition. Mint takes a look at the key sectoral themes that emerged from the Q1 show:

India Inc. fared well in the first quarter

The overall earnings growth was driven by domestic cyclicals—firms that alternate between periods of high and low profit—such as automobiles and banking, financial services and insurance (BFSI), underpinned by robust demand and credit growth. There were improved contributions from healthcare, real estate and capital goods. Conversely, earnings growth was weighed down by global cyclicals such as oil and gas, where firms suffered an up to 90% plunge in profits, along with metals, cement and specialty chemicals. Nifty PAT growth was around 6%, aided by 12% growth in the BFSI segment.

Banks hit by margin pressures

Robust profits notwithstanding, banks continued to see deposit growth lagging credit expansion. The ‘war for deposits’ is forcing lenders to hike interest rates, which is putting pressure on their net interest margins. Net interest income growth was weak for the sector on expected lines. While loan growth remained healthy, there was some moderation compared with the past few quarters. Credit demand was led by retail and MSMEs, while the corporate loans saw rising competition. Asset quality remained broadly stable, but retail and agri slippages saw a seasonal spike.

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Consumer sector facing demand headwinds

Consumer goods firms saw muted revenue growth due to a severe heatwave in Q1, food inflation, rising competition from regional players and the impact of the general election. Most firms reported a gradual pickup in rural demand, which is expected to outpace urban. Overall volume growth remained in single digits. Easing raw material costs boosted margins.

Green shoots in information tech

IT services companies exceeded analyst estimates with a revenue growth of 1.2% quarter-on-quarter. Tier-I players achieved a revenue growth of 0.7% q-o-q, while tier-II firms clocked a growth of 1.6%. Deal wins were encouraging, with TCS reporting deal wins of over $8 billion, double those of Infosys and almost triple Wipro’s. While global macroeconomic headwinds persist, firms reported green shoots of revival in the crucial BFSI segment. Technology spending on artificial intelligence (AI) was a major focus area.

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OMCs emerged as the biggest laggards

After record profits in FY24, state-owned oil marketing companies saw a steep fall in Q1FY25 earnings due to falling refining margins and under-recoveries on sale of LPG at government-controlled prices. India’s largest oil firm, IOC, posted an 81% plunge in standalone net profit at ₹2,643 crore, from ₹13,750 crore a year ago.HPCL’s net profit crashed 90% to ₹634 crore, while that of BPCL nosedived 73% to ₹2,841 crore. Petrol and diesel prices were cut by ₹2 per litre just before the general elections.