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Profit squeeze threatens India Inc as revenue growth outpaces costs
A Mint analysis of 393 firms found total income rose 18% year on year in the April to June quarter, while expenditure climbed 26.5%, leaving profits broadly flat.
Higher commodity prices and steady demand have supported revenue growth for India Inc in the April to June quarter, but rising costs have continued to squeeze margins, according to an analysis by LiveMint Markets.
The outlet’s Mint analysis of 393 companies that have reported standalone results shows aggregate total income increased 18% year on year, the fastest pace in at least three years. However, expenditure rose even faster at 26.5%, leaving profit broadly unchanged from a year earlier, with companies lifting revenues through higher commodity prices, selective price increases, and a favorable base while struggling to convert growth into earnings.
Financial companies have provided the most visible support so far, with 310 non-banking BFSI firms posting 26% year on year growth in total income, their strongest in nearly three years. Yet their expenditure also jumped 35%, eroding operating profitability, and net profit fell nearly 20%, the weakest since Q2FY25, suggesting higher raw material and energy costs outweighed stronger demand.
LiveMint Markets also notes that if crude stays elevated longer, companies could face further margin compression and potential earnings downgrades. Shripal Shah, managing director and CEO of Kotak Securities, said companies with stronger brands and pricing power were better positioned to protect margins through measured price increases, improved product mix, and cost saving, while firms that could not raise prices absorbed more of the input cost increases. Among non-financial companies, Reliance Industries, UltraTech Cement, Bajaj Auto, Nestlé India, and Eternal were cited as revenue growth contributors, but UltraTech Cement converted nearly 20% revenue growth into about 7% profit growth amid higher raw material and freight costs.
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