Early Corporate Earnings Show Broad Moderation in Growth, RBI Report

Earnings data based on early results for the March quarter indicate a broad moderation in growth across sectors, with varied performances among manufacturing, services, and financial companies. These findings are part of the Reserve Bank of India’s May 2025 Bulletin, which reviewed the quarterly performance of listed non-government non-financial firms.

Overall sales growth for these companies slowed to 6.4% year-on-year, from 7.7% in the previous quarter. The deceleration reflects broader weakness in demand. Within manufacturing, sales growth for listed private companies declined to 6.0% from 7.3%, largely due to weak financial results in the petroleum industry. Excluding petroleum, manufacturing sales increased by 9.7%, suggesting more stable performance across other industrial segments.

Among major manufacturing industries, petroleum and iron and steel reported year-on-year declines in operating profits. However, the sector as a whole registered a 4.0% increase in operating profits, despite rising input, staffing, and other operating costs. Operating profit margins remained unchanged from the previous quarter, indicating some success in managing costs.

In the services sector, information technology companies saw improved sales growth, rising to 7.7% from 6.7% quarter-on-quarter. This was accompanied by a fall in operating profit margins. Non-IT services firms saw sales growth slow further to 11.2% from 12.1%, with margins also coming under pressure, likely due to rising costs and tighter pricing conditions.

Debt servicing capacity, as measured by the interest coverage ratio, improved in the manufacturing segment, rising to 9.0 from 8.0, supported by better profitability and lower interest expenses. The ratio for non-IT services fell to 3.2 from 3.4 but remained above unity, indicating ongoing ability to meet interest obligations.

The banking and financial sector reported strong bottom-line growth, even as revenue expansion moderated slightly. Interest income remained the primary driver, reflecting steady credit demand. Other income—such as fees and gains on investments—grew at a double-digit pace. While total expenditure, including interest costs, rose slightly faster than revenue, lower provisioning and improved asset quality led to a higher increase in net profits than in operating profits.

The data point to a mixed earnings environment, with manufacturers outside the petroleum segment maintaining steady growth, while services sectors face rising cost pressures. Financial companies continue to benefit from healthy credit activity and improved balance sheet fundamentals.