Q4 Earnings Signals Growth

As investors eagerly await the outcome of the ongoing Lok Sabha elections, hoping for a decisive political mandate, the equity markets are witnessing heightened volatility, along with optimism driven by quarterly financial results and expectations of a post-election result rally. Mandar Wagh analyses company performances sector-wise to offer deeper insights into the future outlooks of various sectors, considering growth triggers and risk factors. 

The fiscal year 2023-24 marked a remarkable period for India’s economy, as it outperformed major global counterparts and upheld its position as the world’s most stable economy. The Reserve Bank of India has maintained its inflation forecast for the current fiscal year at 4.5 per cent, signalling that the inflation target is within reach. Two years ago, at this juncture, when CPI inflation reached its peak at 7.8 per cent in April 2022, inflation was the major concern looming over the economy. Now, it seems that the once-dominant elephant in the room has taken a stroll and is gradually retreating back to the forest. 

The World Bank has revised its economic growth forecast for the Indian economy in FY25 to 6.6 per cent, attributing the upgrade primarily to ‘upward revisions in investment growth.’ Recently, Amitabh Kant, former CEO of Niti Aayog, forecasted that India is poised to surpass Japan and become the world’s fourth-largest economy by 2025. Moreover, Indian equity markets exhibited impressive resilience, with both the BSE Sensex and Nifty 50 indices soaring around 25-28 per cent throughout the fiscal year, reaching unprecedented levels on the bourses. 

Throughout the financial year, foreign institutional investors (FIIs) shifted to net selling positions, while domestic institutional investors (DIIs) took on the role of net buyers. FIIs experienced a substantial net outflow of ₹14,578 crore, in contrast to DIIs, who bolstered the market with a sizeable net inflow of ₹209,885 crore during the corresponding period. 

As investors concentrate on the impending Lok Sabha election results, anticipating a robust political mandate, the equity markets are experiencing increased volatility, partly influenced by quarterly financial results as well. Let’s analyse the Q4FY24 results of companies sector-wise to gain additional insights into the future outlooks of various sectors, while taking into account growth triggers, risk factors, and any effects of the budgetary announcements. 

Banks 

In the latest quarterly reports, both private and public sector banks have captured investor interest by consistently delivering strong financial performance. Banks have led sectoral growth yet again, with no instances of revenue decline reported. The industry has recorded a notable 26 per cent year-on-year growth in revenue, coupled with an impressive 47 per cent surge in net profit. Similar to the previous financial quarter, HDFC Bank has once again emerged as the top performer in terms of revenue growth, boasting a remarkable 117 per cent year-on-year increase in total income and a 67 per cent surge in interest earned. 

One of the reasons for such higher growth is due to amalgamation of HDFC into HDFC Bank and there cannot be a like to like comparison. Meanwhile, UCO Bank, Axis Bank and Yes Bank have taken the lead in terms of net profit growth, each experiencing triple-digit gains. Surprisingly, several small finance banks, including ESAF Small Finance Bank and AU Small Finance Bank, have reported notable year-on-year declines in net profit. The sector’s growth has been propelled by significant credit demand, expansions in loan portfolios, improved asset quality, reductions in NPAs, and the favourable impact of increased interest rates since the onset of the corona virus-triggered pandemic. 

Additionally, the sustained profitability growth in banks can be credited to several factors including the market penetration of digital public goods like UPI, the digitisation of business activities leading to reduced channel costs, and fintech platforms collaborating with banks to bolster the inclusion of new-tocredit customers nationwide. While digitisation and technology have become a boon for the banking and fintech industry, they recently posed an obstacle for Kotak Mahindra Bank. 

The Reserve Bank of India (RBI) barred the bank from onboarding new customers on its online and mobile banking channels and issuing fresh credit cards due to deficiencies observed in the bank’s IT systems and controls. Following a significant setback in its stock performance, the bank is taking corrective action by targeting the recruitment of around 400 engineers this year to hasten the enhancement of its technology systems. 

Financial Services

Although many listed financial services companies have not yet declared their results, the ones that have announced them are notably impressive. Their performance is fostering a prevailing sense of optimism that spans from the banking sector to the wider financial services industry. Jio Financial Services Ltd. has demonstrated remarkable resilience, spearheading sectoral development with an astounding 691 per cent year-on-year revenue growth and a 237 per cent surge in net profit. 

Despite experiencing a robust 30 per cent aggregate year-onyear revenue growth, the financial services industry struggled to achieve considerable aggregate net profit growth. Notable contributors to this deterioration included IDFC Ltd., Indostar Capital Finance Ltd., and Mahindra & Mahindra Financial Services Ltd. Other financial services segment, particularly capital market companies, investment and brokerage houses and ratings firms, displayed remarkable resilience, boasting a notable 40 per cent year-on-year net profit growth. Among the leading industry players were Central Depository Services (India) Ltd., 360 One Wam Ltd., and Care Ratings Ltd. 

In a recent move, the Reserve Bank of India (RBI) released a draft suggesting stricter lending norms and increased monitoring for under-construction infrastructure projects. The proposal includes higher provisions for such projects and emphasises rigorous stress monitoring by lenders. After the event, the shares of PSU banks and financial services companies took a significant dive. It will be intriguing to observe how lenders navigate these norms and maintain resilience in the upcoming quarters! 

The fast-moving consumer goods (FMCG) industry has been dealing with several challenges for a while now. India’s price-sensitive consumer market has experienced a drop in demand after companies increased prices by nearly 25 per cent over the last two years to compensate for rising input costs. These costs surged initially due to global supply chain disruptions caused by restrictions aimed at controlling the spread of the corona virus. During Q4FY24, the FMCG industry showed a satisfactory performance, achieving a modest 6 per cent year-on-year revenue growth. However, industry leaders like Nestle India Ltd., Britannia Industries Ltd. and Hindustan Unilever Ltd. trailed significantly behind smaller competitors. 

In contrast, Lotus Chocolate Company Ltd., Sheetal Cool Products Ltd. and ADF Foods Ltd. witnessed substantial growth in both revenue and net profit. Global research firm Kantar indicated that the demand for daily groceries, essentials and household products is likely to be muted in the current quarter. However, it suggested a rural-led recovery in the second half of FY25, even though urban consumption might have remained a relative laggard. Additionally, the prospect of ample rainfall is a welcome relief for farmers, companies and consumers alike who have been contending with erratic rainfall, El Nino conditions, and food inflation over the past few years. 

Information Technology


The information technology industry is experiencing a shift in fortunes as global recession concerns alleviate compared to the period of economic downturn sparked by the pandemic. Major economies are showing signs of improvement, marking a departure from the uncertainties that previously plagued the industry. Reduced spending, particularly in the US due to decreased demand, had cast a shadow over the industry, but there are now indications of improvement despite reports of layoffs, reduced bonuses and limited pay hikes. 

Moreover, the prevailing global optimism concerning artificial intelligence and other emerging technologies has notably contributed to the industry’s improvement, serving as a beacon of hope for the future. Global IT equities saw a notable surge as the Federal Reserve is currently contemplating favourable decisions for companies by considering interest rate cuts. During Q4FY24, the IT industry recorded an aggregate 3 percent year-on-year revenue growth and an 8 per cent rise in net profit, with most companies showing positive results. 

While industry leaders like Tata Consultancy Services Ltd., Infosys Ltd. and HCL Technologies Ltd. saw moderate growth, KPIT Technologies Ltd., L&T Technology Services Ltd. and Persistent Systems Ltd. caught investors’ attention with robust growth in both revenue and profit. Conversely, Wipro Ltd. and Tech Mahindra Ltd. encountered notable difficulties in achieving growth. 

In the previous fiscal year, the Union Budget 2023-24 strongly emphasised infrastructural development, foreseeing long-term benefits for the metals sector, especially iron and steel companies. In the recent budget, the government reaffirmed its unwavering commitment to prioritise infrastructure, proposing a significant 11.1 per cent increase in capital expenditure to ₹11.11 lakh crore. Notable announcements included plans to upgrade 40,000 railway bogies to Vande Bharat standards, the construction of 2 crore houses, doubling the number of airports, and procuring 1,000 new aircraft, among others. 

With metals playing a vital role across these industries, optimism within the sector has surged. Analysts are bullish on metal stocks, anticipating them to ascend to new heights if the current government secures a robust electoral mandate. This sentiment is fuelled by the government’s ongoing emphasis on the sector and predictions of additional significant announcements in the future. 

While market leaders in the iron and steel industry, such as JSW Steel Ltd., Tata Steel Ltd. and Hindalco Industries Ltd., have not yet released their latest quarter results, some Mid-Cap and Small-Cap companies have stood out with robust performances. Lloyds Metals & Energy Ltd. achieved a remarkable 77 per cent year-on-year growth in revenue, with operating profit soaring over 150 per cent. Gallantt Ispat Ltd. and Jai Balaji Industries Ltd. emerged as notable performers in terms of both revenue and net profit growth. 

In FY23-24, the Indian real estate industry experienced unprecedented growth, exceeding all expectations and establishing new records. Urbanisation, expansion of the middle class, and infrastructure development are the key drivers behind the current surge. Additionally, foreign investments and government backing have further bolstered the optimistic market sentiment. Finance Minister Nirmala Sitharaman unveiled an augmented allocation of ₹80,670.75 crore for the government’s flagship PM Awas Yojana in the interim Union Budget 2024. 

The government’s dedication to tackling housing challenges and constructing an additional 2 crore homes under the scheme signifies a positive stride in fortifying the housing sector. As urbanisation continues, this demand is prominently reflected in a growing need for housing, commercial properties, and essential infrastructure. Overall, for Q4FY24, the industry has experienced a 10 per cent year-on-year growth in revenue and a 15 per cent year-on-year surge in net profit. However, the performance varies among individual companies. 

Among the industry leaders, Anant Raj Ltd. and Macrotech Developers Ltd. achieved significant double-digit revenue growth. Conversely, Mahindra Lifespace Developers Ltd., Indiabulls Real Estate Ltd. and Godrej Properties Ltd. saw substantial declines in revenue. On the profitability front, Mahindra Lifespace Developers and Anant Raj attracted investors with robust year-on-year growth. On the other hand, Macrotech Developers faced a notable setback in profitability. Nonetheless, it surpassed analysts’ estimates as per a Bloomberg poll. Significant upfront costs such as land acquisition, construction, permits and regulatory compliance, coupled with increased interest rates and pricing pressures, have diminished profit margins. 

In recent times, particularly evident in budget announcements, there has been a pronounced focus on power, renewable energy, and notably, solar energy. The government’s efforts are directed towards ensuring last-mile connectivity and electricity access to all unconnected households in rural and urban areas. A notable initiative involves empowering 1 crore households to receive up to 300 units of free electricity monthly through the rooftop solar programme. 

Additionally, the government is pursuing various initiatives to achieve the net-zero emissions target, including providing financial support for offshore wind energy, advancing coal gasification, expanding the electric vehicle (EV) ecosystem, and introducing a new scheme for bio-manufacturing. Moreover, the rapid growth potential of solar and wind energy, coupled with the ongoing transformation in electric vehicles, is evident. 

The optimism prevailing in the industry, as evidenced by the robust rallies experienced by the shares of power and energy companies over the past few years, stems from their strong financial performance. The power and energy industry demonstrated strong year-on-year revenue growth, marking a significant 30 per cent surge across the industry. Adani Energy Solutions Ltd., Adani Power Ltd. and Tata Power Company Ltd. notably achieved double-digit revenue growth, solidifying their leading positions in the industry. 

Meanwhile, Waaree Renewable Technologies Ltd., Inox Wind Energy Ltd. and Inox Wind Ltd. showcased exceptional resilience, achieving triple-digit revenue growth, reflecting their robust performance in the market. Despite a notable year-on-year growth in net profit for the majority of companies, the industry’s aggregate was impacted by a downturn in profit growth, particularly due to dismal performance from Adani Group companies. Adani Green Energy Ltd. and Adani Power Ltd. experienced significant year-on-year declines in net profit, with decreases of 70 per cent and 48 per cent, respectively. 

The company highlighted that the depreciation charge and finance cost for the quarter saw a substantial increase, primarily due to the commissioning of the Godda project which had a notable impact on the company’s profitability. In addition, its performance may have been affected by low seasonal demand during the winter months due to unfavourable weather conditions, elevated operating costs, and pricing pressures. 



China, leveraging its extensive chemical production capacity, implemented a dumping strategy, exporting goods at prices below their market value in their country of origin. This influx of discounted goods had detrimental effects on local manufacturing, heightening competition and creating difficulties for companies to compete both domestically and globally. Domestic chemical manufacturers, already contending with challenges related to volatile raw material prices, suffered a significant setback, as evidenced by the ongoing impact reflected in weak quarterly performances among chemical companies. 

While the majority of chemical companies reported weak performances, the chemical industry, on an aggregate basis, experienced a 2 per cent year-on-year decline in revenue and a significant 18 per cent fall in net profit. Although industry leader Pidilite Industries Ltd. managed to achieve modest growth in both revenue and profit, other leading players such as SRF Ltd., Gujarat Fluorochemicals Ltd., Aarti Industries Ltd. and Atul Ltd. showed impacted performances on the profitability front. According to market experts, it is expected that chemical companies will need several more quarters to fully recover and bolster profitability, as the situation is anticipated to improve once China’s chemical dumping practices come to an end. 

Conclusion
Focusing on the Q4FY24 results of Indian listed companies, more than 70 per cent of the companies that have released their results thus far have shown positive growth. Overall, these companies experienced a 13 per cent year-on-year growth in revenue, while net profit rose by 14 per cent. Additionally, there was an improvement in EBIT growth, which reached 18 per cent year-on-year. When considering sector-wise performance, banks emerged as the top performers, with none reporting negative performance. Furthermore, strong performances were observed in the financial services, iron and steel, automotive and pharmaceutical industries, marked by notable growth in both revenue and net profit. 

The IT industry saw a reversal in fortunes as global recessionary fears eased and macroeconomic conditions improved. Growth in emerging technologies, including AI, played a significant role in driving this growth. Performance varied across sectors such as real estate, power, energy and FMCG, with modest revenue growth but lacklustre profitability. Meanwhile, the chemicals, sugar and textile sectors are grappling with sector-specific challenges similar to those faced by global companies. It will indeed be intriguing to observe the outcome of the election results and how future government policies will contribute to the continued growth of both the Indian economy and companies.