India Inc has managed to sustain net profit growth that has outstripped muted revenue expansion over the past several quarters, largely buoyed by favourable credit conditions and lower input costs. However, this divergence is now converging, with analysts stressing an urgent need for a resurgence in top-line growth to sustain bottom-line improvements.
The average year-on-year (Y-o-Y) net profit growth for BSE 500 companies (excluding oil marketing and fertiliser firms) over the five quarters (from the March 2023 quarter to March 2024 quarter) stood 20 per cent.
This contrasts sharply with revenue growth, which averaged 9 per cent during the same period. Historically, profit margins and top-line growth have moved in tandem.
This sharp divergence in 2023-24 has been driven by margin expansion, supported by tailwinds such as lower input costs and improved operational efficiencies. However, these factors are now beginning to fade.
This story is from the August 20, 2024 edition of Business Standard.
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This story is from the August 20, 2024 edition of Business Standard.
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