Corporate earnings growth slows in Q4 FY25 amid economic headwinds

The Indian corporate sector recorded a muted performance in the quarter ended March 2025, as both profit and sales growth moderated amid weak macroeconomic conditions and .

A recent analysis by Bank of Baroda, covering 1,787 listed companies, reveals that profit after tax (PAT) rose by 9.2 per cent year-on-year in Q4 FY25, a notable slowdown from the 12.6 per cent growth posted in the same quarter of FY24.

In absolute terms, net profit stood at Rs 3.43 lakh crore during the March 2025 quarter, up from Rs 3.13 lakh crore in Q4 FY24. Sales increased by 5.7 per cent to Rs 28.81 lakh crore, compared to a 9.2 per cent rise in the year-ago period when companies reported sales of Rs 27.25 lakh crore. Despite the softer topline growth, net profit margins improved slightly to 11.9 per cent from 11.5 per cent a year earlier.

The subdued results underscore the challenges faced by Indian firms in navigating a volatile global landscape. “Growth in both sales and net profit was lower in Q4 FY25 relative to last year. Growth in net profit is still impressive at 9.2 per cent. Net profit margin has shown sequential improvement, which is a positive sign,” The Indian Express reported Madan Sabnavis, Chief Economist at Bank of Baroda as saying.

The Reserve Bank of India (RBI) recently revised its real GDP forecast for 2025-26 downward to 6.5 per cent, from the earlier estimate of 6.7 per cent. RBI Governor Sanjay Malhotra attributed the revision to global trade and policy-related uncertainties, which continue to cloud the economic outlook.

Manufacturing firms, excluding those in the services sector, saw a relatively stronger profit performance. The net profit of 1,079 manufacturing companies grew by 13.7 per cent in Q4 FY25, reversing the 2 per cent decline seen in the same quarter last year.

These companies reported profits of Rs 1.66 lakh crore during the March 2025 quarter, up from Rs 1.46 lakh crore in Q4 FY24. However, sales growth in the sector decelerated to 3.9 per cent from 4.7 per cent a year ago.

Marico Ltd MD and CEO Saugata Gupta told The Indian Express that consumer sentiment remained broadly stable, with improving rural demand and mixed urban consumption patterns.

“Margins for most players were under pressure due to input cost pressures,” Gupta said. Marico reported an 8 per cent increase in PAT at Rs 343 crore in Q4 FY25, up from Rs 318 crore in the year-ago quarter.

Hindustan Unilever CEO and MD Rohit Jawa was quoted as terming that the demand in the fast-moving consumer goods (FMCG) segment remained subdued throughout FY25. “Rural demand continued to improve gradually while urban demand moderated over the year,” he observed.

Reliance Industries Ltd (RIL), meanwhile, reported a 6.4 per cent rise in consolidated net profit at Rs 22,611 crore in Q4 FY25, compared to Rs 21,243 crore in Q4 FY24.

RIL Chairman and MD Mukesh Ambani highlighted the impact of global challenges, particularly low margins in downstream chemical markets due to demand-supply imbalances. “FY2025 has been a challenging year for the global business environment,” Ambani said.

Looking ahead, companies remain cautiously optimistic about FY26. Expectations of improved consumption, aided by a favourable monsoon and lower food inflation, are likely to support earnings recovery. However, concerns remain over the external environment, particularly with regard to trade policy.

“US tariff policy remains a downside risk to the industrial outlook. While the pause on reciprocal tariff hikes provides temporary relief, the 10 per cent universal tariff hike by the US remains in effect since April,” said Dharmakirti Joshi, chief economist at Crisil.

He added that further tariff escalation post-June and sluggish global growth could weigh on exports. The prospect of a trade deal between India and the US is being closely monitored, amid heightened uncertainty over long-term investment sentiment.