The profitability of India’s non-financial companies declined in Financial Year 2025 (FY25), even as they recorded stronger sales growth, according to a report by market intelligence firm CareEdge. The report stated that net sales grew by 7.7% year-on-year (YoY) in FY25, a significant improvement compared to 3.7% YoY growth in FY24. However, the overall expenditure surged by 8.1% YoY in FY25, sharply up from 1.8% YoY in the previous year. The increase in expenses, primarily driven by rising input costs, offset the gains from sales growth and weighed heavily on the companies’ profitability.
Surge In Raw Material And Service Costs Erode Profit Margins In FY25
CareEdge highlighted that the steep rise in service and raw material costs played a major role in increasing corporate spending. These input costs jumped by 9.9% in FY25, in contrast to the 0.8% growth recorded in FY24. This surge emerged as a significant driver of overall expenditure, further tightening profit margins for companies. In addition, the report pointed out a slowdown in employee cost growth, which it described as a concern from a broader demand outlook. It noted that anecdotal evidence indicated a mixed trend in urban consumption, impacting overall business sentiment.
As per the CareEdge report, the increase in input costs directly contributed to a sharp moderation in operating profit growth, which dropped to 6.4% in FY25 from 15.3% in FY24. The weakened operating performance also impacted the bottom-line, with profit after tax (PAT) growth falling to 6.4% in FY25, down from 14.5% in the previous year. The report emphasized that these numbers reflect the pressure non-financial firms are currently facing. It attributed part of the weak recovery to disruptions seen in the first half of the year, especially those related to the general elections.
Modest Recovery Signals Need For Closer Monitoring In FY25
Despite the challenges, CareEdge stated that corporate profitability has improved from the lows seen in early FY25, where election-related disruptions hampered growth. However, it described the ongoing recovery as “modest” and in need of closer monitoring. The report concluded by stressing the importance of a strong recovery in consumption, which it identified as crucial for any significant pickup in private capital expenditure in the near term. CareEdge’s insights underline the tightrope Indian corporates are walking between growth momentum and cost-related pressures.
(From ANI)
