Double-digit growth seen on corporate scoreboard in Q2, but bank, IT, pharma lag

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India Inc's revenue grows at nine-quarter high of 22%; profit expands at 28% YoY.

On the other hand, sectors including banking and finance, information technology (IT) and pharmaceuticals showed deceleration in year-on-year growth compared with June quarter numbers.

A low base in the year-ago comparable quarter in terms of slower revenue and profit growth of 6.7% and 12.4%, in that order, also helped the trend for the latest quarter.

The total sample's operating margin contracted by 150 basis points year-on-year to 20.8%, reflecting weakness in the banking sector's profitability as net interest margins remained weak during the quarter. Excluding the lending sector, the sample's operating margin improved 20 basis points to 15.1%. In addition, the sample's revenue and profit growth improved to 26.9% and 33.9%, respectively, after excluding banking and finance companies. The share of the lending sector in revenue and profit fell 34.8% and 54.6% from 37.3% and 56.8%, respectively, in the year-ago quarter.

The IT sector's share in revenue and net profit also dropped to 15.5% and 18.1% from 16.8% and 20.4% year-on-year, in that order. The sector has been reeling under pressure from elongated project execution cycles as clients take time to assess the impact of new technologies, especially artificial intelligence (AI), on their businesses.

At the beginning of the results season, analysts had anticipated double-digit aggregate revenue and net profit growth for the companies under their coverage, helped by broad-based momentum. "Expect 13 of 18 sectors to deliver double-digit sales growth, led by automobiles (around 29%), consumer discretionary (over 23%), industrials (over 22%) and nonbanking financial services (over 27%)," said Elara Securities (India).