India Inc. Earnings Review: Q4FY25 & Full Year FY25 Performance Analysis

Introduction

The financial year 2024-25 (FY25) and its final quarter (Q4FY25) presented a mixed but generally resilient performance for India Inc. While the scorching pace of earnings growth seen in the post-pandemic recovery phase moderated, corporate India navigated a challenging global environment and domestic nuances to deliver positive results. Key highlights include a notable outperformance by mid-cap stocks, the sustained strength of domestic-demand-oriented sectors, and early signs of a rural consumption revival. However, global headwinds continued to impact export-focused industries like IT. 

Overall, Q4FY25 saw profit and sales growth, albeit at a slower rate than the corresponding quarter of the previous year for many segments. We shall discuss the numbers in detail in the subsequent sections.

For the full year FY25, Nifty 50 companies reported modest earnings per share (EPS) growth of 1% after several years of strong expansion. The outlook for FY26 remains cautiously optimistic, contingent on factors like monsoon performance, inflationary trends, and global economic stability.

Macroeconomic Backdrop for FY25

India’s Real GDP growth accelerated to 7.4% in Q4FY25, in spite of the high base. This would take our economy’s GDP growth for the full year (FY24-25) at roughly about 6.5%. Sure, this is a moderation from the 9.2% GDP growth we enjoyed in FY24. 

Key macroeconomic features of FY25 included:

• Inflation: Moderation in overall inflation provided some relief, aiding in controlling input costs for companies.

• Consumption: Private Final Consumption Expenditure grew at 7.2% in FY25, up from 5.6% in FY24, indicating a strengthening consumer base. However, trends varied, with some moderation in urban demand for certain categories, while rural demand showed signs of picking up towards the latter half of the year.
  
• Investment: Gross Fixed Capital Formation growth came in at 7.1% slowed from the previous year’s 9.4%. Government capital expenditure continued, though its growth momentum normalized.
  

Results Report Card 

With that context in mind, let’s move on to the results delivered by India Inc. in Q4FY25 and in turn the full year FY2025. Corporate earnings in Q4FY25 indicated a slowdown in growth momentum compared to the high base of Q4FY24 but largely met or slightly exceeded subdued expectations.

Before we get to the numbers, let me walk you through the process through which we have analyzed the results. As a market proxy, we will be analyzing the Nifty 500 Index constituents. In this discussion, we shall be talking about 414 companies. The residual 86 companies (500-414 companies) cannot be analyzed as they do not have sufficient data available. 

• Overall Level

On an overall basis, in Q4FY2025, Nifty 500 companies (414 our universe) have delivered a Revenue growth of 6.4% on a YoY basis vs 9.5% growth in the same period last fiscal year. As far as Net Profit is concerned, the growth came in at 14.4% versus 21% last year. So you would say that growth has tapered off as compared to last year. 

• Market Cap Level

Out of the 414 companies,

1. Largecap – 86 companies
2. Midcap – 128 companies
3. Smallcap – 200 companies

For largecaps, the revenue growth was a modest 5.5% while net profit growth stood at 12.1%.

For midcaps, the revenue growth was 7.9% while net profit growth stood at 26.2%.

For smallcaps, the revenue growth was 7.9% while net profit growth stood at 13.9%.

• Sector Level

For this purpose, we have considered the GICS Sectors. In our universe of 414 companies, there were 11 unique sectors, them being –

You have to take these numbers with a pinch of salt as there might be possible distortions. For instance, Communication Services shows a negative profit growth of 344%. Now that’s not a normal figure. The reason why we are seeing that figure is because there are loss making companies (viz PVR Inox, Vodafone Idea) in this GICS Sector. So, due to negative bottomlines for a few of them, the number has gotten distorted. 

Sector Deep Dives:

• Banking, Financial Services, and Insurance (BFSI):
  • Large private banks saw some Net Interest Margin (NIM) recovery.
  • Overall credit growth moderated during FY25, impacting BFSI’s otherwise strong performance trajectory from the previous year.
  • Focus on asset quality continued.
    
• IT Services:
  • Continued to face pressure from global macroeconomic uncertainties and cautious client spending.
  • Q4FY25 revenue for the sector saw a slight sequential decline (around 0.7% QoQ).
  • FY26 growth guidance from companies varied, with most remaining cautious (e.g., HCLTech projected 2-5% growth, while others were more subdued). BofA Securities anticipates low single-digit growth (around 3%) for the sector in FY26.
• Fast-Moving Consumer Goods (FMCG):
  • FY25 saw subdued demand trends overall, with urban demand moderating.
  • A key positive was the gradual improvement in rural demand, especially in the latter half of FY25 and in Q4, supported by better rabi crop output and easing inflation.
  • Volume growth came back slightly, but margin pressures persisted due to raw material inflation.
    
• Automobiles:
  
  • Growth was seen across two-wheelers, driven by domestic demand.
  • EVs have seen new launches in 2Ws and 4Ws space.
  • FY26 volume growth is projected to be in the low to mid-single digits across segments.
    
• Manufacturing & Industrials (incl. Capital Goods):
  • Sectors linked to infrastructure and domestic manufacturing showed strength.
  • Capital Goods companies reported robust order flows and margin growth, benefiting from government infrastructure projects. The sector saw PAT growth of around 14% YoY in Q4 (MOFSL).
    
• Power Sector:
  
  • FY25 saw modest power demand growth (around 3%) due to a surplus monsoon in some regions and a high base effect from FY24.
  • However, capacity addition improved, mainly from renewable sources.

Key Themes Shaping India Inc.’s FY25 Journey

• The Domestic Economy: A Pillar of Strength: Domestic-facing businesses were the primary drivers of corporate earnings, demonstrating the Indian economy’s resilience amidst global uncertainties.
  
• Rural Resurgence: A Glimmer of Hope: After several quarters of weakness, rural demand showed definitive signs of recovery, particularly for FMCG and consumer durables. This was a significant positive takeaway.
  
• Urban Demand Dynamics: While overall consumption held up, certain urban segments showed signs of moderation or slower growth compared to previous periods.
  
• Global Uncertainties: A Persistent Overhang: Export-oriented sectors, especially IT and Chemicals, continued to grapple with a challenging global macroeconomic environment, weak demand, and geopolitical tensions.
  
• Inflation and Input Costs: While overall inflation moderated, specific input cost pressures were noted by some companies. For example, QSR companies witnessed continued inflation in milk, cheese and the likes. Stable commodity prices towards year-end were seen as a positive.
  
• Investment and Capex Trends: Government-led infrastructure spending continued to be a crucial driver. Private sector capex showed signs of picking up, though a broad-based revival is still awaited.

Looking Ahead: Outlook for FY26

Analysts and corporate commentaries suggest a cautiously optimistic outlook for FY26, with earnings growth expected to improve from the modest levels of FY25.

• Earnings Growth Projections: Nifty 50 EPS growth is forecast to be in the range of 10-13% for FY26.
  
• Key Drivers:
  • Continued recovery in consumption demand, especially if rural momentum sustains and urban demand stabilizes.
  • A favorable monsoon is critical for rural incomes and overall sentiment.
  • Potential easing of interest rates later in the year could boost demand.
  • Government’s continued focus on infrastructure and manufacturing.
  • Stable commodity prices and manageable inflation.
    
• Sectoral Outlook:
  • Domestic Consumption: Sectors like FMCG, Consumer Durables, and Auto are expected to benefit from a broader demand recovery.
  • BFSI: Banks and NBFCs are anticipated to perform well, driven by credit growth (though likely to remain moderated) and improving economic activity. Rate-sensitive segments like realty could also see benefits.
  • Industrials/Manufacturing/Capex: Expected to continue their positive trajectory.
  • IT Services: Outlook remains subdued, with growth likely to be in the low single digits due to ongoing global uncertainties. Margin management will be key.
    
• Potential Tailwinds: Further policy reforms, successful trade agreements, and improved global economic conditions.
  
• Key Risks:
  • Unfavorable monsoon or resurgence in food inflation.
  • Persistent global economic slowdown or recessionary trends impacting exports and investment.
  • Geopolitical escalations.

Conclusion

FY25 was a year of transition for India Inc., moving from a phase of sharp recovery to more normalized growth. The corporate sector demonstrated resilience, largely driven by the inherent strength of the domestic economy and an emerging rural revival. While Q4FY25 and the full year saw moderated headline growth numbers compared to the high base of previous years, the underlying performance, especially in mid-caps and domestic-focused sectors, was encouraging.

Looking to FY26, the stage appears set for a potential earnings rebound, though this is contingent on navigating both domestic and global variables effectively. Continued policy support, a benign macroeconomic environment, and a pick-up in private consumption and investment will be crucial for India Inc. to realize its growth potential in the upcoming fiscal year. Investors will likely adopt a more selective, fundamentals-driven approach, focusing on companies with strong balance sheets, clear earnings visibility, and an ability to adapt to the evolving economic landscape.

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