Decline in corporate earnings growth, weak overall demand

- The total net profit of 213 companies increased by 22 percent compared to the same period last year to Rs. 96,348 crores

Companies that have declared results so far for the second quarter (July-September) of the current financial year have seen their third consecutive rise in total net profit but there are signs of a sharp decline in revenue and profit as compared to the same quarter last year. Revenues and profits of companies in the manufacturing and non-financial sectors declined further. Banks and finance companies have managed to maintain their gross interest income growth in double digits during this period. However, there has been a slight decline compared to the previous quarter.

The total net profit of the 213 companies that announced results for the second quarter of FY2024 increased by 21.8 percent over the same quarter last year at Rs. 96,348.5 crores. In the first quarter of the current financial year, the total profit of these companies has increased by 23.6 percent and in the second quarter of the financial year 2023 by 9.4 percent.

This analysis covers historical single quarter data of HDFC. HDFC merged with HDFC Bank in July this year. The total net sales of the companies declaring results increased by 13.6 per cent in the second quarter of the current fiscal year-on-year to Rs. 6.13 lakh crore, which is the slowest growth in the last 11 quarters. This is the fifth quarter in a row that earnings growth has declined. This indicates that aggregate demand in the economy remains weak.

Dhananjay Sinha, head of research and equity strategy at Systematics Institutional Equity, said, 'The demand environment in the Indian economy is weak and companies across all sectors are struggling to grow their sales and earnings. Demand among companies in the consumer sector is lowest, while demand in construction-related sectors is increasing due to higher government spending. But its impact will also be limited as the government's capital expenditure is only 8 percent of the country's gross domestic product.

The growth seen in the companies' profits and revenues is mainly due to banks and non-bank lenders such as Bajaj Finance. Growth in net sales of non-financial companies such as IT services and FMCG remained in the low single digits.

Excluding banks, finance, insurance and stock broking, the total net profit of 168 companies rose by 18.6 percent to Rs. 50,200 crores, which is the first increase. In the previous quarter this was Rs. 49,100 crore marginally higher than last fiscal's fourth quarter of Rs. 52,673 crore is less than Rs. In comparison, the total income of these companies has increased by 13.7 percent annually. The profit and revenue growth of the IT sector has come down sharply. Net income of IT companies included in the analysis grew by just 6.7 percent in the second quarter of FY2024, the slowest growth in the last 11 quarters.