Key Points

According to the report, the aggregate profit after tax (PAT) for companies in the BSE500 index (excluding Oil Marketing Companies) grew just 10 per cent year-on-year in Q4FY25, and 9 per cent for the full FY25, down from a stronger 21 per cent growth recorded in FY24.

The report said "Q4FY25 PAT growth for BSE500 (ex-OMCs) rose to 10 per cent YoY (Q3FY25: 8 per cent), though top line stayed weak, due to cost rationalisation (wage bill growth just 5 per cent) and a low base".

In Q4FY25, profits grew 10 per cent from the same quarter last year, slightly better than the 8 per cent growth seen in Q3FY25. This was achieved mainly through cost-cutting measures, including a modest 5 per cent growth in wage bills, and the benefit of a low base.

While sectors like metals, telecom, chemicals, and cement posted improved profits, segments such as public sector banks and industrials, which had led growth in FY24, saw a slowdown.

The report also pointed out a significant drop in capital expenditure (capex) growth. Despite strong operating cash flows, India Inc's capex grew just 6 per cent in the second half of FY25, compared to 20 per cent growth seen in FY23 and FY24.

While this cautious approach might be seen as positive from a governance and valuation standpoint, it also reflects weak demand conditions and may pose risks to future earnings.

Mid- and small-cap (SMID) companies, which had underperformed large-cap companies for most of FY25, showed some profit recovery in Q4FY25, supported by cost control and a low base.

However, for the full year, their performance aligned more closely with large caps, after outperforming them in FY24.

The report described FY25 as a "year of reconciliation" where several trends from FY24 moderated. Profits, revenues, and capex all grew by around 8-10 per cent, returning to pre-COVID trends.

Looking ahead, the outlook for FY26 remains uncertain. The report noted that earnings estimates for FY26 have been downgraded by 2 per cent, and one-year forward earnings per share (EPS) projections have stagnated, similar to trends seen before the pandemic.

Nuvama said the Street currently expects 15 per cent earnings CAGR for FY25-27, but flagged downside risks due to weak demand, slowing credit growth, corporate cost-cutting, and uncertain export conditions.

In summary, FY25 marked a slowdown for India Inc, with all major financial indicators reconciling with a subdued top-line performance, and the outlook for FY26 remains cautious.

- ANI