NIFTY 50 Q3 Profits Fall 8.1% After 13 Quarters, Revenue Up 10% Despite Labour Code Impact

Mumbai: Earnings of Nifty 50 companies fell in the December quarter for the first time in 13 quarters. Industry data showed that aggregate net profit of 37 Nifty 50 companies declined 8.1 percent year-on-year. This is the first negative profit growth since the September 2022 quarter.

However, revenue performance remained strong.

Revenue Growth Returns to Double Digits

Excluding banks, financial services and oil and gas companies, total revenue rose 10 percent in the quarter. This was the first double-digit growth since the March 2023 quarter.

Operating profit grew 7.5 percent year-on-year. This was better than 6.1 percent growth seen in the September quarter and 5 percent growth recorded a year ago.

On a sequential basis, revenue growth improved from 16 percent to 20 percent in Q3 FY26, especially after the implementation of the GST cut.

Impact of New Labour Codes

Analysts said the main reason for the fall in profits was the one-time accounting impact of India’s new Labour Codes. Under the new rules, companies must raise the basic salary to 50 percent of total cost-to-company. This also increases gratuity provisions.

Because of this change, overall profit after tax was reduced by around 5 percent. The technology sector was hit harder, with an estimated 13 percent dip in profits.

The new Labour Code came into effect in November. It introduced changes related to wages, workplace safety and social security.

IT Companies See One-Time Charges

Major IT companies -Tata Consultancy Services, Infosys and HCL Technologies-together incurred over Rs 4,373 crore in one-time charges linked to the new rules. This contributed to a double-digit moderation in their quarterly profits.

Banking Sector Pressures

In the banking sector, earnings were affected by the Reserve Bank of India’s intervention on priority sector lending and agriculture book adjustments. Analysts said these are short-term issues and may not have a long-lasting impact.

Overall, while revenues improved, profit growth was temporarily affected due to regulatory and accounting changes.