Despite double-digit growth, Q3 profits of Indian firms fall below expectations

After falling below the Reserve Bank of India's tolerance threshold of 6 per cent for two straight months, inflation is back to haunt India at 6.52 per cent. The central bank's policies and union budget have prioritised growth, global recession is bound to have an impact on the growth of Indian businesses. Even as India is described as a bright spot in a gloomy economic environment, India Inc's growth has faltered in the October to December quarter.

Indian companies have managed to clock double digit growth at 17.4 per cent in the third quarter of FY23, but it was still less than half of 38.8 per cent in the same period last year. It was lower even in comparison to the April to June quarter for FY23, when growth was at 36 per cent. Analysts believe that the growth was dragged back by prices of global commodities such as metal, oil and gas.

This has affected overall performance, as a large number of companies have missed profit estimates, despite revenue from sales meeting expectations. Interest costs and depreciation have led to a 10.6 per cent drop in profits of the 3,000 plus firms monitored. This has happened for the second straight quarter, while borrowings for capital expenditure also went up due to lower cash flow.

Profits of financial firms and the auto sector were above estimates, but at the same time metals, fuel, cement, retail, telecom and media are all lagging behind.