Amid geopolitical uncertainty and market volatility, Indian companies managed to keep their profits afloat in the March quarter (Q4FY25). However, a detailed analysis of the profitable companies shows that much of the profitability involved a reduced wage bill as companies aggressively protected their bottom lines.
An analysis of BSE-listed companies, based on standalone data sourced from Capitaline, reveals that for a growing majority of profit-making firms, net profit growth overtook growth in employee costs in the March quarter, highlighting a concerning trend.
About 71% of these profit-making companies reported net profit growth that outpaced their wage cost increases in the fourth quarter, up from 69% in the October-December period, Mint’s analysis shows. This indicates an emerging pattern of prioritising profits over spending on the workforce.
A rolling sample of 107 profitable companies were analysed for the March quarter, versus 128 in the preceding quarter.
The impact of slowing revenues
Mint’s analysis of Q4 data reinforces a similar pattern found in the third-quarter review, which revealed that the aggregate net profit for 3,577 listed companies had increased despite three consecutive quarters of slowing revenues. This divergence between revenue performance and profit growth raises critical questions about the sustainability of the companies’ profit-making strategies.
A common sample of 270 listed companies also shows an evident slowdown in growth figures. Net profit, on average, grew just 8.4% year-on-year in the March quarter, down sharply from the 15.7% growth in the December quarter. Employee expenses slowed 5.8% year-on-year in the March quarter and 7.8% in the December quarter.
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Within these companies, 84 reported net profit declines in the fourth quarter, up from 75 in the preceding three months. Notably, 57 of these 84 struggling companies increased their employee expenses in the fourth quarter, while 62 of the 75 did that in Q3.
Seven companies recorded steeper wage contractions than their corresponding profit declines, compared to just two in the previous quarter, underscoring the rise in companies that are prioritising profits in the current volatile environment.
Also read | What IT companies’ Q4 show means for investors
Reliance Industrial Infrastructure Ltd is one example of a company where wage cost reductions exceeded profit contractions.
As Indian corporations continue navigating economic headwinds, this pattern of margin protection through cost-cutting measures in the absence of any meaningful revenue growth may signal deeper structural challenges in maintaining both profitability and employees’ compensation.
This is the fourth part of a series of data stories about the ongoing earnings season. Read the first, second and third part here.
