The March quarter results from the early birds reflect margin pressures as businesses continue to grapple with tepid demand and increase in raw material costs. With demand expected to remain subdued — whether for consumer goods in the local market or software services overseas — most of the companies that have announced their results have seen either a ratings downgrade or a cut in earnings estimates for 2025-26.
Net sales for a sample of 163 early birds were up by just 5.5% year-on-year (y-o-y) with net profits rising 6.1%. For 126 companies (excluding banks and financials), revenues were up 8% y-o-y but net profits grew just 4.7%. In this sample, Reliance Industries (RIL) accounts for more than a third of the sales. RIL’s consolidated sales rose 9.9% in the same period.
The weak consumer demand is evident from FMCG major Hindustan Unilever’s (HUL) numbers. Volumes for the quarter increased by just 2% and absence of much pricing powers left revenue growth at an anaemic 2.4%. Foods major Nestle, whose products are relatively more expensive, also reported a disappointing quarter, clocking in a 2% volumes growth and 3.5% value growth. This resulted in net operating revenues rising by only 4.5%. India’s number one carmaker Maruti Suzuki saw just 6.4% revenue growth, driven by a 4.7% increase in volumes. Reliance Retail, however, put up a good show with net revenues jumping by over 16%.
Dalmia Bharat reported a 4.4% increase in adjusted cement volumes for the March quarter and realisations were weak, falling by 2.4% y-o-y due to muted prices in southern markets, leaving net sales lower by 5% y-o-y. At Rallis, revenues were down 1.4% y-o-y. However, metals player Hindustan Zinc posted a smart 20% jump in its top line.
At Maruti Suzuki, input costs and marketing expenses drove down the auto major’s operating profit margin by 180 basis points to 10.5%. Gross margins at HUL contracted 140 basis points and the management revised its operating profit guidance for the near term to 22-23% from the earlier 23-24%. At Nestle, gross margins trended down by 65 bps while at Rallis they were down 425 bps.
Even for businesses that posted a good rise in revenues, input costs impacted profits. At cement producer ACC, the total income was up 11% but operating profits were down 4% y-o-y. Tata Consumer’s sales were up a strong 17.3% but gross margins contracted 420 bps because the cost of materials jumped 26%. In the IT space, both top tier and mid-tier companies turned in lacklustre performances. TCS reported revenues that were down sequentially on a constant currency basis. The software giant missed margin estimates, which contracted 30 bps sequentially despite some help from the rupee depreciation. Although the management cited some uncertainty in demand in verticals like retail, manufacturing, insurance, telecom, healthcare, it appeared confident that revenue growth will recover.
Infosys reported a sharp 3.5% sequential revenue decline due to lower sales of third-party items. The Street’s expectations from IT companies for 2025-26 are tempered as they expect discretionary spends to plateau in the wake of heightened global uncertainties.