Despite sales growth, rising input costs impact profitability of non-financial firms: CareEdge

ANI June 21, 2025 340 views

Non-financial companies posted stronger sales growth in FY25, but rising raw material and service costs hurt profitability. Employee cost growth slowed, raising concerns about urban consumption demand. Operating profit growth dropped sharply to 6.4% from 15.3% in FY24. The report warns that weak consumption could delay private capital expenditure recovery.

"While sales growth saw improvement, an uptick in expenditure led by rising input prices has moderated corporate profitability." - CareEdge Report
New Delhi, June 21: The profitability of non-financial companies came under pressure in Financial Year 2025 (FY25) despite registering improvements in the sales growth, according to a report by market intelligence firm CareEdge.

Key Points

1

Non-financial firms saw 7.7% YoY sales growth in FY25

2

Input costs surged 9.9%, squeezing operating profits

3

Employee cost growth slowed to 7.2%, raising demand concerns

4

Profit after tax growth fell to 6.4% from 14.5% in FY24

As per the report, the net sales grew by 7.7 per cent Year-on-Year (YoY), up from 3.7 per cent in FY 2025 in its previous fiscal, meanwhile, total expenditure, which impacts the profitability, rose by 8.1 per cent YoY in FY25, significantly higher than the 1.8 per cent YoY growth recorded in FY24."The sales growth of corporates improved in Q4 FY25. While sales growth saw improvement, an uptick in expenditure led by rising input prices has resulted in a moderation in corporate profitability growth in the quarter," the report added.

Non-financial corporations are companies that primarily engage in producing goods and services for the market, but are not involved in financial activities like lending or investing.

The report observed that within the expenditure components, the growth of employee costs of non-financial firms moderated to 7.2 per cent in FY25 from 10.7 per cent in FY24.

Nonetheless, a steep rise in the cost of services and raw materials--up 9.9 per cent in FY25 compared to just 0.8 per cent in the previous year--was a key driver of the overall increase in spending, weighing on corporate profitability.

According to the report, the deceleration in employee cost growth remains a point of concern from a demand perspective, particularly given anecdotal evidence indicating a mixed outlook for urban consumption.

"A strong recovery in consumption is also imperative for a pickup in private capital expenditure," the report added.

Rising services and raw materials costs have resulted in a sharp moderation in operating profit growth to 6.4 per cent in FY25 from 15.3 per cent in FY24.

"This decline in operating performance has also translated into weaker bottom-line results, with profit after tax (PAT) growth falling to 6.4% in FY25 from 14.5% in the previous year," the report added.

Going further, it added that overall, the corporate profitability has improved from the lows in the first half of the FY25, where the performance was hit by election-related disruptions.

However, the recovery has been modest and needs closer monitoring, the report added.

Reader Comments

R
Rajesh K.
This is worrying for our economy. If companies are making less profit, they'll invest less and hire fewer people. Government should look at reducing GST on raw materials to help manufacturing sector. Make in India needs this support!
P
Priya M.
Not surprising at all. As a small business owner, I've seen material costs shoot up 20% this year alone 😓 Meanwhile customers want discounts. How are we supposed to survive? Hope RBI takes note in next policy meeting.
A
Amit S.
Interesting that employee cost growth slowed down. Companies are clearly trying to cut costs wherever possible. But if salaries don't grow, how will consumption improve? It's a chicken-and-egg situation for our economy.
N
Neha T.
The report mentions election disruptions affected H1 performance. This is why we need more stable policies - every 5 years everything stops for elections. Can't we find a better way? 🤔
S
Sanjay V.
Raw material costs up 9.9% is shocking! Global supply chains are still recovering post-pandemic, plus Middle East tensions aren't helping. Maybe time to focus more on local sourcing under Atmanirbhar Bharat.
K
Kavita R.
While profits are down, at least sales are growing - that's a silver lining. Shows demand exists despite inflation. Companies need to innovate to reduce input costs. Jugaad time! 💡

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Non-financial firms Corporate profitability CareEdge report Rising input costs FY25 earnings