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Indian companies across multiple sectors have reported disappointing results in the second quarter of fiscal year 2025, notes a new JM Financials report. Consequently, their poor performance has triggered stock price corrections for affected companies. The brunt of this weaker than expected earnings was largely borne by consumer centric sectors like FMCG (fast moving consumer goods), retail, and auto, which slacked largely due to dampened urban demand. For instance, India's largest automaker, Maruti Suzuki, reported a 5% YoY decline in its total domestic passenger vehicle wholesales, largely on the back of pent-up inventory. Similarly, Honda reported a staggering 23% YoY dip in its total sales during October 2024. A recent report by Bernstein noted that around 48% of the companies listed on the NSE100 index missed their earnings estimate for Q2FY25, the highest since March 2020. Most companies have mentioned deteriorated domestic demand, urban slowing, macroeconomic risk, and margin pressures as the main reasons behind the dip. "The quarter's earnings have made investors nervous," noted the JM Financials report. The challenging environment stems from multiple factors: softening consumer demand, rising input costs, and companies' limited ability to increase prices. Moreover, this is not limited to just one quarter. Companies have been reporting weak, single-digit earnings growth for the last six consecutive quarters. Data from India Data Hub also suggests that corporate profits of listed companies plunged by as much as 3.4% during the quarter ended September 30, 2024. This is in stark contrast to the year-ago period, where they had shot up by over 40% The oil and gas sector had a difficult quarter, with refiners hit by weak margins and city gas distributors struggling with higher input costs. Financial institutions showed mixed results. While government-owned banks reported strong numbers, microfinance institutions and some private lenders faced massive difficulties with their unsecured loans. Most notable amongst this was the case of IndusInd Bank, which saw its net profits dip by 40% amidst burgeoning provisions, which climbed 87% to Rs 1,820 crore in Q2, as against Rs 974 crore reported in the year-ago period. <h2>Markets head southwards</h2>The selling trend by FPIs has dragged down the major Indian indices, the Nifty 50 and Sensex, both of which have dropped by around 8% since the beginning of this selling spree in October. According to National Securities Depository Ltd. (NSDL) data, FPIs offloaded equities worth a significant Rs 19,994 crore in just the first five trading sessions of November last week. The impact is clearly visible on Indian stock markets. Data suggests that while every sector in October closed the month in red, auto, oil and gas, and consumer durables were the most badly hit, each declining by as much as 10% during the month. Another indicator underlining the inherent weakness of the market was that the month saw only 242 stocks hit their 52-week high, significantly below the usual monthly average of 310.

India Inc. stares at an earnings dearth in Q2, FMCG, auto, and consumer durables falter

<ul><li>Volume contraction for the FMCG sector was more pronounced in rural areas, says a <keyword id="87153" type="General" weightage="80" keywordseo="bnp-paribas" source="Orion">BNP Paribas</keyword> report. </li><li>While the research firm expects margin improvement in FY24, its earnings estimates are below consensus on account of INR depreciation, increase in ad spends and selective price cuts. </li><li>We think consensus earnings estimates for FY24/25 are too optimistic, the report says. </li><li>The valuation multiples of Indian FMCG companies have expanded since June 2022, BNP Paribas says. </li></ul>Consumer goods majors have been hit hard by inflation over the last few quarters, with volume growth taking a backseat. Clearly, growth has been driven by multiple price hikes that were taken by the players – and not volume growth. The road ahead looks better as commodity prices are cooling and price cuts could even spur consumption. In spite of the fact that affluent India’s consumption is holding up well, volumes from mass-market and categories that benefitted from Covid like healthcare and hygiene segments <a href="https://www.businessinsider.in/finance/article/inflation-burns-a-hole-in-the-pockets-of-indias-lower-income-households-from-fmcg-goods-flip-flops-to-crackers-consumption-takes-a-backseat/articleshow/95536971.cms">were affected by inflation</a>. “Revenue growth was driven by price hikes, with volumes remaining subdued across categories. The volume contraction was more pronounced in rural areas. Companies expect rural demand to recover in the second half of FY23, on the back of government interventions, a good monsoon and higher crop realisations,” says BNP Paribas. Ad spends and price cuts Going forward, BNP shares the optimism of the companies that the second half of the current financial year will bode well for revenues and margins too as commodity prices are moderating. “While we expect margin improvement in FY24, our earnings estimates are below consensus as we anticipate INR depreciation, an increase in advertisement spends and selective price cuts to drive volumes that are under pressure,” said the research firm. Lower ad spends in addition to a cut in corporate tax rates have been aiding the sector’s earnings growth for the last five fiscal years in spite of muted growth in revenues and gross profits. But now ad spends might resume to bring back consumers who have been downtrading to cheaper unbranded products for the last six months, leaving little scope for a strong margin recovery. Lower estimates, pricier stocks BNP Paribas raised its sales estimates for most companies during the earnings season but lowered the aggregate EBITDA margin for the sector by 30 bps to 20.9-22.1% for FY23 and FY24 – thereby reducing EBITDA as well as earning per share by 1-2% for both the years. “While the outlook for FY24 is positive, driven by moderation in raw material costs and signs of a <keyword id="9592296" type="General" weightage="20" keywordseo="rural-recovery" source="Orion">rural recovery</keyword>, we think consensus earnings estimates for FY24/25 are too optimistic. With no triggers for a sharp multiple de-rating, we believe some stocks can see time correction over the next year. Our preferred sector picks remain ITC, Britannia, Emami and Jubilant Foodworks,” said the report. Most FMCG stocks have been on a bull run in the last five months, and that has made them expensive relative to the tough conditions that await for its volume growth. “Since June 2022, the valuation multiples of Indian FMCG companies have expanded as concerns about unabated inflation eased. This has led to several stocks moving above their five-year mean next twelve months, price to earnings ratio,” the report said. The downside risks that the research firm sees include an increase in competitive intensity, leading to companies cutting prices and sales growing at a lower-than-expected rate; and lower-than-expected margin recovery. Rural recovery to be affected by muted Kharif season Many economists and rating agencies are also questioning the pace of economic growth of the country – marred by <a href="https://www.businessinsider.in/finance/news/no-end-to-downgrades-in-gdp-estimates-as-economists-remain-divided-on-severity-of-slowdown/articleshow/95847763.cms">constant downgrades</a>. Apart from global spillovers, experts believe that a lot is riding on the rural recovery – that will play a big role in the volume and revenue growth of FMCG majors. While there have been green shoots of recovery seen in <a href="https://www.businessinsider.in/business/auto/news/mixed-demand-trends-for-autos-in-november-as-festive-boost-wears-off-but-signs-of-rural-recovery-visible/articleshow/95848505.cms">spurts like auto sales</a>, rural consumption has remained muted even after lockdowns ended. A major driver for rural recovery is a good Kharif crop, which, however, has been affected by erratic monsoons this year. “Untimely heavy rainfall in the states across North-west and Central India between end-September 2022 and mid-October 2022 is likely to have added to the moisture levels of the standing crop, which poses some downside risks to the kharif output relative to the first Advance Estimates,” said an ICRA report. SEE ALSO <a href="https://www.businessinsider.in/business/news/vikram-kirloskar-the-mit-engineer-who-loved-to-build-factories/articleshow/95875911.cms">Vikram Kirloskar: The MIT engineer who loved to build factories</a> <a href="https://www.businessinsider.in/business/corporates/article/tatas-mega-aviation-merger-is-poised-for-flight-but-the-skies-are-not-clear-yet/articleshow/95526116.cms">Tata's mega aviation merger is poised for flight, but the skies are not clear yet</a>

India FMCG sector profits may be weighed by ad spend hikes, price cuts: BNP Paribas

<ul><li>FMCG companies are expected to register strong margins in Q1 as they will see the full effect of earlier-taken price hikes playing out. Cooling raw material prices will help. </li><li>Demand for staples have been stable, but the beauty and personal care category has not yet recovered fully. </li><li>The summer has seen a decline or low growth in ice creams and juices due to unseasonal rains. </li></ul>With cooling raw material costs, the FMCG sector is expected to kick in the first quarter of FY24 with ‘good quality’ profits, backed by improvement in margins. Input costs have been cooling over the last few quarters and have either remained stable or seen mild moderation, and companies have not been passing them off very generously in the form of price cuts. “We expect most of the companies to register stronger sequential gross profit margin (GPM) improvement in 1Q24F with input cost inflation cooling down further, high-priced inventory getting consumed and the full effect of earlier-taken price hikes playing out,” said a research report by Nomura. Certain categories such as hair oils, edible oils and soaps had witnessed price cuts in earlier quarters, which will flow through in the first quarter, as per BNP Paribas. Also, new price cuts and promotions were seen in laundry, edible oils and other home care categories during the quarter but no major price cuts were seen in biscuits and salts. Double digit revenue growth expected Price cuts and volume growth for the sector are directly proportional for the sector, and as of now most of growth seen in the sector was pricing-led. But that’s changing, analysts say. Demand from urban areas has been stable, with slight sequential improvement in rural demand as well. Also, the demand for staples have been stable, but the beauty and personal care category has not yet recovered though improving due to the price cuts. All in all, the sector should be able to present a good revenue growth for the quarter – notwithstanding the cooler summer this April-June with unseasonal rains that affected sales of juices and ice creams. “We estimate staples/discretionary (ex-ITC) pack to register 10.2%/8.8% revenue growth. We expect a good quarter from Nestle, Godrej Consumers and ITC and a weak print from Marico,” says a report by Kotak. Antique Stock Broking also expects the FMCG sector (not including ITC) to report early double digit revenue growth with moderation in pricing led growth. ITC is expected to see a fall in revenue as its agri business is expected to see a drop due to high-base effects. Nomura expects Nestle, Tata Consumers and Dabur to report the highest revenue growth YoY, and with ITC and Marico to post lower value growth. FMCG sector revenue growth projections YoY <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Company </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Nomura </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Kotak Institutional Equities </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Antique Stock Broking </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">HUL </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;"> 9.1% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">9.1% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">9% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">ITC </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">-6.1% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">4.6%* </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">-6% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Marico </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">6.5% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">4.2% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">4% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Dabur </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">9.4% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">10% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">9% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Godrej Consumer </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">10.2% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">10% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">NA </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Tata Consumer Products </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">11.3% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">12.5% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">NA </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Nestle India </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">15.7% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">16.6% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">16% </td></tr></tbody></table>Source: Research reports *Kotak has considered standalone results for ITC Price cuts &amp; rising competition The street will closely watch management commentary on pricing, as analysts believe that the sector is poised for a good show in the first half of FY24 with a raw material cost tailwind. “However, in the second half of FY24 we expect revenue growth to moderate as pricing benefits should fade and growth would have to be volume-led,” said a report by BNP Paribas. There has been no aggressive price war as of now in the sector as of now, but if price cuts are not taken by large players in the segment, it might lead to unorganized players gaining market share. In the last one year, many consumers have ‘downtraded’ to unbranded products or local brands during periods of high inflation. “Prices of most stock keeping units (SKUs) have increased sharply over the last two years. Soap and detergent prices have risen 40-50% over that period. So far the price cuts have been limited and largely confined to the value segment. We believe price cuts might be needed to drive volumes,” said BNP Paribas. Without pricing strategies laid out, most FMCG players might see revenue growth challenges re-emerge this year, especially in the second half. SEE ALSO <a href="https://www.businessinsider.in/business/corporates/news/it-companies-like-tcs-infosys-wipro-hcl-tech-q1-2023-24-earnings-preview/articleshow/101482733.cms">IT sector Q1 earnings preview: All eyes on deal wins, revenue guidance cuts</a> <a href="https://www.businessinsider.in/thelife/news/want-your-veggies-to-taste-like-chocolate-a-vr-glass-may-help-trick-your-mind/articleshow/101487079.cms">Want your veggies to taste like chocolate? A VR glass may help trick your mind</a>

FMCG sector Q1 preview — Caught between price cuts and volume growth

<ul><li>Mid-tier companies like L&amp;T Technology Services, Persistent Systems and Coforge are expected to report better growth than IT majors, say analysts. </li><li>Most of them are largely expected to deliver either a flat or a slight QoQ improvement in margins, with the exception of Cyient. </li><li>LTTS, which will see the full impact of SWC acquisition this quarter, is expected to deliver double-digit revenue growth but its margins are expected to be impacted. </li></ul>The Indian IT sector is bracing itself for a tough quarter and a year ahead, as organisations across the world are cutting down their discretionary spends, thanks to an uncertain economic outlook. Most IT sector companies are expected to present a muted earnings report card for the first quarter of FY24. Within the IT pack, mid-tier companies like L&amp;T Technology Services (LTTS), Persistent Systems and Coforge are expected to show better growth <a href="https://www.businessinsider.in/business/corporates/news/it-companies-like-tcs-infosys-wipro-hcl-tech-q1-2023-24-earnings-preview/articleshow/101482733.cms">as compared to their larger peers</a>. Tata Consultancy Services (TCS) and Infosys are expected to show a flat revenue growth in constant currency (CC) terms QoQ, while Wipro is expected to post a decline. The rest of the midcap universe, however, is expected to present fair growth with the exception of Cyient and Mphasis, which are likely to see declines. “Mid-tier IT growth premium is expected to continue with sequential growth performance led by Persistent Systems. The laggard in mid-tier IT will be Mphasis with an expectation of a sequential decline,” said a report by HDFC Securities. Q1FY24 projections for QoQ revenue growth in CC terms <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Company </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Nuvama </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">IIFL Securities </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Axis Cap </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">LTTS </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">11.8% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">11.1% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">12.3% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Cyient </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">-2.4% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">-2.6% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">NA </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Coforge </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2.4% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2.9% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">3% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Persistent Systems </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2.6% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2.9% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">3.5% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Mphasis </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">NA </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">-2% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">-1% </td></tr></tbody><tbody></tbody><tbody></tbody></table>Source: Research reports Best amongst equals Like their larger peers, most of the midcap companies are also expected to see either a flat or a slight de-growth in margins, in spite of tailwinds from rupee depreciation. High wage costs will most likely eat into the margins of most tech companies, including the bigger ones. Mphasis, which is largely expected to report a revenue decline, is expected to deliver a better performance in terms of margins. “EBIT margin expected to be up slightly, by 10 bps QoQ, due to higher offshore mix and operational efficiencies despite revenue drag,” said IIFL Securities. EBIT refers to earnings before interest and taxes. LTTS, which will see the full impact of SWC acquisition this quarter, is expected to deliver double-digit revenue growth but its margins are expected to be impacted. The company acquired Smart World &amp; Communication (SWC) Business of L&amp;T in January 2023. “Organic margin to see strength aided by revenue growth but reported margin to see a dip of around 170 bps QoQ led by the impact of SWC integration,” says a report by Axis Capital. In spite of a bleak sectoral outlook, most analysts are closely watching how the second half of the year will pan out. They will be paying close attention to the deal commentary, growth that’s to be seen in the top clients, and hiring and attrition trends to hunt for any silver lining in the dark clouds. SEE ALSO <a href="https://www.businessinsider.in/business/corporates/news/it-companies-like-tcs-infosys-wipro-hcl-tech-q1-2023-24-earnings-preview/articleshow/101482733.cms">IT sector Q1 earnings preview: All eyes on deal wins, revenue guidance cuts</a> <a href="https://www.businessinsider.in/business/news/fmcg-q1fy24-preview-dilemma-between-price-cuts-and-volume-growth/articleshow/101519331.cms">FMCG sector Q1 preview — Caught between price cuts and volume growth</a>

Mid-tier IT companies expected to outperform the big guns

<ul><li>The IT sector’s wage bill growth fell to 3% in Q3 FY24 from 22% in the same quarter last year.</li><li>Sectors like <keyword id="19931572" type="General" weightage="20" keywordseo="fmcg" source="keywords">FMCG</keyword>, metals, power, cement, pharma, chemicals also saw single digit wage growth in Q3.</li><li>The <keyword id="19910880" type="General" weightage="20" keywordseo="bfsi" source="keywords">BFSI</keyword> sector remained an outlier as its wage bill growth was strong at 22% in Q3.</li></ul>The age of sharp salary hikes seems to be over. <keyword id="19895063" type="General" weightage="20" keywordseo="india" source="keywords">India</keyword>’s top 500 listed private companies’ wage growth has moderated to 9% year on year in the third quarter of FY24. Including public sector enterprises, BSE500’s wage inflation slowed to 11%. In the same quarter last year, it was at 20%, says a report by <keyword id="20055355" type="General" weightage="20" keywordseo="nuvama-institutional-equities" source="keywords">Nuvama Institutional Equities</keyword>. “The worrying aspect of wage bill growth is the sharper moderation in private sector wage bill growth. Private sector wage bill growth has moderated to 9% YoY—a decadal-low (ex-Covid). Such a sharp slowdown, if it persists, could weigh on consumption, particularly the premium segment,” says <keyword id="19895773" type="General" weightage="20" keywordseo="nuvama" source="keywords">Nuvama</keyword>’s Q3FY24 Earnings Review. Unsurprisingly, the IT sector saw the most moderation, as its wage bill growth in Q3 at just 3% year on year. In the corresponding quarter last year, it was at 22%. “For IT companies, headcount is now contracting year on year. While this could bottom out, sustained recovery is needed for its revival,” said Nuvama. As per Xpheno, the top eight IT services firms in India<a href="https://www.businessinsider.in/careers/news/it-bellwethers-slash-headcount-in-fy24-but-indian-techies-find-a-home-with-gccs/articleshow/107679515.cms"> reduced their headcount by</a> 75,000 in the last one year. Sectors like FMCG, metals &amp; mining, power, cement, pharma, chemicals saw single digit wage growth. “Wage bill growth is moderating in most other spaces as well. For most sectors, wage bill growth is below the levels seen a year ago,” said Nuvama. On the other hand, sectors like auto, consumer services, durables and real estate sector saw double digit wage bill growth in the quarter. BFSI sector remains an outlier The only sector which saw strong wage bill growth in Q3 is banking, financial services and insurance sector; which came in at 22%. The average annual attrition in the sector is still high, at around 30-35%. In private banks, it’s <a href="https://www.cnbctv18.com/business/companies/rbi-closely-watching-high-attrition-at-some-private-banks-says-shaktikanta-das-18207931.htm">much more pronounced</a> at 40-45%. While private sector banks saw their wage bill go up by 23%, in PSU banks, the growth was at 20%. Financial services, however, saw its wage bill go up by 29%. Wage bill growth <table style="border-width: initial; border-style: none;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Sector </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Q3 FY24 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Q3 FY23 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">IT </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">3% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">22% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">BFSI </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">22% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">19% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Metals &amp; Mining </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">4% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">4% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Energy </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">12% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Consumer services </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">14% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">24% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Auto </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">14% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">9% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Durables </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">14% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">10% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">FMCG </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">6% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">12% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Industrials </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">11% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">10% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Power </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">4% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Cement </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">5% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">6% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Real estate </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">12% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">32% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Pharmaceuticals </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">8% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">9% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Chemicals </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">0% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">8% </td></tr></tbody><tbody></tbody></table>Source: Capitaline, Nuvama Research Dwindling EBIDTA growth The Nuvama report also says that in the third quarter, BSE500’s revenue growth remained subdued at 6-7%, similar to what was seen in the first half of FY24. The earnings before interest tax depreciation and amortization (EBIDTA) growth on other hand, dwindled to 10% from 20% seen in the first half. “This is mainly due to fading input price tailwinds and operating de-leverage. PAT growth, however, held up in high teens. All in all, chinks are developing in profit momentum with EBITDA slowing sharply as margin tailwinds fade while demand fails to recover,” Nuvama said. Even as the aggregate profit growth held up to 16% YoY in Q3, a weak revenue growth does not spell good news for corporate employees who are hoping for a chunky wage hike. “Given a weak top line, wage bill growth is likely to remain subdued going ahead as well, potentially weighing on urban consumption,” says Nuvama.

You Searched For "fmcg sector earnings" and got 5 results

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