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Nifty 50 Profits Fall for First Time in 13 Quarters Despite Revenue Jump

Nifty 50 companies reported their first year-on-year profit contraction in 13 quarters during Q3, even as revenue growth returned to double digits. The decline in aggregate net profit is largely attributed to the one-time accounting impact of India's new labour codes, which required changes to salary structures and gratuity provisions. Major IT firms like TCS, Infosys, and HCL incurred significant one-time charges, contributing to a sharp profit moderation in the technology sector. While banking earnings were also affected by RBI interventions on lending, analysts view these factors as short-term headwinds.

Key Points: Nifty 50 Q3 Profits Dip After 13 Quarters of Growth

  • First profit decline in 13 quarters
  • 10% revenue growth excluding key sectors
  • New labour codes trim profits by ~5%
  • Tech sector hit hardest with ~13% dip
2 min read

Nifty 50 Q3 profits dip after 13 quarters despite 10 pc revenue growth

Nifty 50 companies see first profit decline in 13 quarters despite 10% revenue growth, impacted by new labour codes and RBI measures.

"aggregate net profit for 37 Nifty 50 companies fell 8.1 per cent from a year earlier - Industry Data"

Mumbai, Feb 20

Earnings of Nifty 50 companies showed a year‑on‑year contraction in the December quarter for the first time in 13 quarters, even as top-line growth returned to double digits, as per industry data.

Excluding banks, financial services and oil and gas firms, aggregate revenue rose 10 per cent in the quarter - the first double‑digit increase since the March 2023 quarter but aggregate profits dipped due to one‑time accounting impact of India's new Labour Codes.

Operating profit grew 7.5 per cent year on year, up from 6.1 per cent in the September quarter and 5 per cent a year earlier.

Despite the revenue gains, aggregate net profit for 37 Nifty 50 companies fell 8.1 per cent from a year earlier, marking the first negative profit growth since the September 2022 quarter, industry data showed.

Analysts attributed the dip in profits to the one‑time accounting impact of India's new labour codes, which require basic salary to be raised to 50 per cent of total cost‑to‑company, with rise in gratuity provisions. The Labour Code changes trimmed overall profit after tax by roughly 5 per cent, with the technology sector estimated to have a 13 per cent dip, they added.

Meanwhile, revenue growth accelerated sequentially in Q3 FY26 from 16 per cent to 20 per cent, notably after the implementation of the goods and services tax (GST) cut.

Transition to the new labour code took effect in November and introduced changes on wages, workplace safety and social security.

TCS, Infosys and HCL together incurred over Rs 4,373 crore in one-time charges related to implementation of the new rules, contributing to double digit moderation in profit for the quarter, according to multiple reports.

In the banking space, the Reserve Bank of India's (RBI) intervention on priority sector lending and agriculture book adjustments weighed on earnings but analysts said these were short-term factors.

- IANS

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Reader Comments

R
Rohit P
As an investor, this headline is worrying but the details are reassuring. Revenue growth is strong at 20%! The profit dip is a one-time accounting adjustment, not a business slowdown. The underlying operating profit growth is healthy. Market might overreact tomorrow.
A
Aman W
So Infosys, TCS took a big hit? ₹4,373 crore is a massive charge. Hope this doesn't impact their hiring or campus placements this year. Tech sector is already facing global headwinds.
S
Sarah B
Interesting analysis. The core business seems robust with operating profit up. The one-time hit for labour reforms and RBI adjustments are short-term pains for long-term structural gains. GST cut boosting revenue is a big positive.
V
Vikram M
While I support better wages for workers, the government must ensure such policy changes are implemented with more lead time. A sudden ₹4,373 crore hit to top IT firms in one quarter can spook foreign investors. Policy stability is key.
K
Karthik V
The headline number looks bad after 13 quarters of growth, but look at the details: revenue up 20%! That's fantastic. This is a technical correction, not a fundamental one. Might be a good buying opportunity in the market if stocks dip.

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