India Inc Q1FY24 results profit surges 65% but shows growth on slope.

The April-June 2023 quarter (Q1FY24) has witnessed a sharp recovery in headline corporate earnings compared to previous quarters. However, this recovery appears lopsided, with significant profit growth coming from a handful of companies. Here’s an analysis of the Q1FY24 corporate earnings:

• Profit Growth: The combined net profit of the 983 listed companies that reported their Q1FY24 results so far increased by 64.7% year-on-year, reaching a record high of ₹2.68 trillion. This growth is noteworthy, but it’s important to note that a significant portion of the growth is driven by a few companies.
• Revenue Growth Slowdown: Despite the robust profit growth, there is a continued slowdown in revenue growth. The combined net sales of all companies in the sample grew by only 7.3% year-on-year in Q1FY24, marking the lowest growth rate in the past 10 quarters.
• Sector-wise Performance: With the exception of banking & finance and automotive sectors, most sectors reported a slowdown in top line growth during the June quarter. This indicates that the overall revenue growth is not broad-based and is concentrated in specific sectors.
• Concentration of Growth: The net profit growth was primarily contributed by a few companies, and even among them, three government-owned oil marketing companies (OMCs) played a significant role. The volatility of OMC earnings due to factors like changes in fuel taxes and international oil prices raises questions about the sustainability of such profit growth.
• Concerns for Future Trajectory: Analysts and economists have raised concerns about the future trajectory of corporate earnings. The concentration of profit growth and the slowdown in revenue growth indicate potential challenges for sustained earnings growth across sectors.
• Key Contributors to Growth: Bharat Petroleum Corporation (BPCL), Hindustan Petroleum, Indian Oil Corporation, State Bank of India, and Tata Motors were among the top contributors to overall earnings growth in Q1FY24.
• Exclusion Impact: Excluding banks, finance & insurance (BFSI), and public sector OMCs, the combined net profit of other sample companies increased by 20.4% year-on-year in Q1FY24. However, this growth rate is lower than in previous quarters.
• Auto and BFSI: Growth has been primarily led by the banking & finance (BFSI) and auto sectors. Excluding these sectors from the sample, the net profit growth for the rest of the companies slows down significantly.
• Concerns for Future Quarters: The skewed distribution of earnings growth and the slowdown in revenue growth have raised concerns about the direction of corporate earnings in the coming quarters. The sustainability and broad-based nature of profit growth remain uncertain.

In conclusion, while the Q1FY24 corporate earnings exhibit a significant recovery in profits, the concentration of growth and the slowdown in revenue growth signal potential challenges for sustained and widespread earnings growth in the future.