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The profitability of non-financial companies came under pressure in Financial Year 2025 (FY25) despite registering improvements in the sales growth, according to a report by market intelligence firm CareEdge.
As per the report, the net sales grew by 7.7 per cent Year-on-Year (YoY), up from 3.7 per cent in FY 2025 in its previous fiscal, meanwhile, total expenditure, which impacts the profitability, rose by 8.1 per cent YoY in FY25, significantly higher than the 1.8 per cent YoY growth recorded in FY24."The sales growth of corporates improved in Q4 FY25. While sales growth saw improvement, an uptick in expenditure led by rising input prices has resulted in a moderation in corporate profitability growth in the quarter," the report added. Non-financial corporations are companies that primarily engage in producing goods and services for the market, but are not involved in financial activities like lending or investing. The report observed that within the expenditure components, the growth of employee costs of non-financial firms moderated to 7.2 per cent in FY25 from 10.7 per cent in FY24. Nonetheless, a steep rise in the cost of services and raw materials--up 9.9 per cent in FY25 compared to just 0.8 per cent in the previous year--was a key driver of the overall increase in spending, weighing on corporate profitability. According to the report, the deceleration in employee cost growth remains a point of concern from a demand perspective, particularly given anecdotal evidence indicating a mixed outlook for urban consumption. "A strong recovery in consumption is also imperative for a pickup in private capital expenditure," the report added. Rising services and raw materials costs have resulted in a sharp moderation in operating profit growth to 6.4 per cent in FY25 from 15.3 per cent in FY24. "This decline in operating performance has also translated into weaker bottom-line results, with profit after tax (PAT) growth falling to 6.4% in FY25 from 14.5% in the previous year," the report added. Going further, it added that overall, the corporate profitability has improved from the lows in the first half of the FY25, where the performance was hit by election-related disruptions. However, the recovery has been modest and needs closer monitoring, the report added. (ANI)
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