India Inc sees faster sales growth in FY25, but profits squeeze as input costs surge: RBI data

The sales of India's listed private non-financial firms grew at a faster pace in the financial year 2024-25, rising to 7.2% from 4.7% in the previous fiscal, data released by the Reserve Bank of India (RBI) on Thursday showed.

The manufacturing and services sectors showed improved performance despite persistent global economic headwinds.

Sales in the manufacturing sector rose by 6.0% as against 3.5% a year earlier, led by robust demand in automobiles, electrical machinery, food & beverages, and pharmaceuticals, the central bank said.

However, petroleum and iron & steel companies posted a decline in sales.

IT services companies saw sales rise 7.1%, up from 5.5% in the previous fiscal year, while non-IT services firms recorded double-digit growth, led by “healthy performance of telecommunication, transport & storage services and wholesale & retail trade industries.”

Manufacturing companies’ raw material expenses rose 6.6% during the year, outpacing sales growth and pushing the raw material-to-sales ratio up to 55.7% from 54.2%, pointing to input cost pressures.

Staff cost rose by 10.0%, 4.4% and 12.0% during 2024-25 for manufacturing, IT and non-IT services companies, respectively, according to the RBI.

However, the staff cost-to-sales ratio remained largely stable for manufacturers and moderated for services firms.

Operating profit growth slowed to 6.0% in manufacturing, down from 12.4% in FY24, as firms struggled to pass on rising input costs. Profit growth also moderated to 15.9% for non-IT services, while IT companies saw a marginal improvement to 6.1%.

As a result, operating profit margins declined across the board, slipping by 20 basis points (bps) to 14.2% for manufacturers, by 80 bps to 21.9% for IT companies, and by 30 bps to 22.1% for non-IT services firms.

Despite higher input costs and muted margin growth, interest coverage ratios (ICR) improved across major industries, with all sectors maintaining ICRs above the critical threshold of one, indicating better debt servicing capacity.

The findings are based on the abridged financial results of 3,902 listed non-government non-financial (NGNF) companies.