An analysis of about 4,000 companies that reported Q2-FY25 results shows that PAT growth is slowing, impacted by power and refineries segment. The results were a mixed bag. Banks, IT, Pharma and Capital goods performed well. FMCG and Automobile sales have shown weakness for the first time. The lack of volume growth in driving leverage shows on margins despite raw material, employee and fuel costs being favourable. Debt-heavy sectors are beginning to show strain over declining profitability.

PAT growth slows

Oil prices decline along with a fall in gross refining margins, impacting refineries. The high base of last year further compounds the year-on-year decline. Profit growth for the rest seems healthy on an aggregate.

Banks, Pharma, Cap Goods lead charge

Strong performance by banks and turnaround in IT support growth. Capital goods continue their stellar run.

Sectors that are a concern

Big-ticket (Auto) or small-ticket (FMCG) sectors have shown a decline. Core sectors — steel, cement and power — falter on lower prices of output.

Overheads impact operating margins

Raw material costs are firming up, but gross margins stay afloat with price pass-on. Despite lower employee, power and fuel costs, EBITDA margin declines on account of overheads. 

Debt burden

The sectors large on debt — refineries, cement and steel — are showing signs of declining interest coverage ratio. The high cost of financing and lower profitability impact the ratio.

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