India Inc. Posts 15% Profit Growth In Q4FY26 As Revenue Expands At Fastest Pace

[00:00:00]today on wrapping up the Q4 earnings season, giving you a sense of how this earning season has panned out in terms of comparison to the earlier quarters.

[00:00:11]This has been the last quarter where a lot of uh sectoral action has been seen in terms of recovery on the top line on the bottom line has been seen. We will also delve deeper to try and understand the key sectoral trends, the demand trajectories that we witnessed, the corporate profitability as to how it has moved in and we will try and decode in terms of key sectors where the outperformance and underperformance has been seen. Let's welcome our special guest on board. We have Mr. Abhishek Basalik joining in to decode the earnings wrapping season for Q4 is concerned. Thank you so much Abishek for taking the time out for this conversation. First up a quick um over um all outlook on how things have panned out in Q4 largely uh when we compare to the previous um you know quarters for FY26 and has there been a shift in terms of overall performance of the earnings of India Inc.

[00:01:03]So I think the the results actually have been quite good you know much better than what probably most people expected and uh you know that's what I've been saying uh for the last uh couple of weeks that if you look at the median uh PAT growth across all companies that's come in very strongly you know above 1,000 crores market cap uh median pad growth is about uh 20% which is which is actually phenomenal given the circumstances and given the last few quarters that we've seen. So overall I think a very very good uh set of numbers uh from corporate inc this time. Uh Q1 we will probably expect some amount of uh you know margin compression because of uh the bulk of the effect of the Iran US war is going to come through in the first quarter. So uh I mean April May is where we sort of saw the problems.

[00:02:07]>> So quarter one I think we should have uh you know sum you know we should moderate >> uh our expectations but overall you know pretty good numbers.

[00:02:18]>> Good numbers is what we have seen in Q4 across the board. Um you know of course Q1 is something that will give us a greater picture of what has been the true impact of the West Asia war but it will also show us a lot of um you know retaliatory measures that have been taken for a lot of companies like um you know the FMCG companies, the paint companies at large, car companies at large, they have all started to announce price hikes as an impact of the cost inflation that they have witnessed because of the wars. So both of those aspects will also come in in Q1 and the where the outperformance and the underperformance was seen. Uh have you seen or have you noticed uh some of the sectors that have really led the charge this time around in Q4 which have given you a sense of surprise uh better than estimate kind of numbers and across the board and which have those sectors been Abishek? So I think metals have performed really well. Uh real estate has performed very well. Uh manufacturing has done very well. So these have performed very well on the positive side. Uh you know much better probably than my expectations. Uh defense uh contrary to expectations has not done uh you know as well as uh expected. So there has been some moderation in defense numbers but overall again like I you know said before overall very good numbers across the board.

[00:03:51]>> Absolutely. So those have been the key sectors that uh clear outperformance has been seen. We'll also talk about the underperformance. Um you know it does it step out as the clear underperformer this time. Have there been other sectors also?

[00:04:05]Uh actually if you see it has not performed that badly uh especially midcap IT companies results were quite encouraging. It was uh you know not as bad as people were thinking it to be.

[00:04:21]>> Okay. Uh so let's uh also talk about uh you know in terms of where other than IT sector the underperformance was seen where do you see continuing pain from here on as well?

[00:04:33]uh I think uh FMCG and overall consumption uh there is going to be a challenge because obviously a lot of money household uh budget is getting spent on uh you know food and fuel and if we see an El Nino or a super Elnino that has been said uh even if we don't see a super elino you know summers have increasingly become more and more scorching so overall productivity goes down. So people at the lower uh you know households at the lower end of the spectrum they tend to have moderated incomes during these months because physical labor becomes a challenge. So you know next 3 months uh FMCG consumption etc uh especially which is targeted at the the mass market that might uh you know uh suffer uh to an extent obviously uh any sector where there is overdependence on fuel >> uh that that would uh you know come under a fair bit of pressure uh export oriented sector sectors have done well, likely to continue to do well.

[00:05:51]>> Defensive sectors like pharma, healthcare, uh hospitals have done well, expected to continue to do well. Uh interestingly, I think manufacturing is where uh you know where the biggest uh change uh that we are seeing gradually.

[00:06:08]So acrossboard if you you know look at and and when I say manufacturing so manufacturing plus power cement steel all of that put together you know that's where the actual game is and unfortunately uh or fortunately you know depending on where how you look at it uh nifty is uh underweight all these uh you know all these sectors where uh the actual numbers are getting better and where the uh you know where where the actual growth is coming from. Nifty is still overweight it bankingly.

[00:06:45]>> So we increasingly seeing Nifty being rangebound whereas midcap small capsu you know sort of driving the growth >> and I think that will be the theme for probably the rest of the year.

[00:06:57]>> Okay, that's a very interesting take.

[00:06:59]What we've seen in Q4 viewers is that midcaps have truly outperformed large caps. They've been the true drivers of this cycle as uh Mr. Basalik has also pointed out we've seen at least 67% of the companies reporting positive earnings growth within the midcap space compared to about 55% of outperformance in the uh of positive performance in small caps and 49% of positive earnings report that we've seen in large caps this time around. So midsize firms have capitalized better on niche domestic volume growth on operating leverage as well. That's been the clear trend and that's where Mr. Basum Malik expects that there could be continued outperformance going forward from here as well. But let's talk about some of the sectors that you've alluded to.

[00:07:41]Let's talk about banking and BFSI. Um, of course, what we've seen uh this quarter was led by major updates from banks like SBI, ICICI bank, doubledigit credit growth, asset quality dramatically improving. Um, NPS hitting multi-year lows as well. uh but overall going forward from here are you going to be seeing a larger than ever pressure because of the external crisis on the banking and the financial space is that going to be overshadowing the uh domestic outperformance that we've been seeing from some of these banks >> so uh two things one is if I look at again uh the entire uh banking sector uh and I if I look at say for example just the nifty bank >> uh earnings growth has actually not been great uh If you look at overall I if I if I remember correctly it's around somewhere around 9% pad growth >> right so which is which is not something uh great because most of the larger banks have come around that 8 10 uh 11% growth uh now if you look at the overall situation with inflation etc uh the possibility that RBI will add liquidity measures or may be forced to hike rates uh is not going to be going in favor of the especially the larger banks. Uh what I'm slightly more positive on is the MFIs. Uh right now the MFIs seem to be you know sort of picking up. Uh last one one and a half years have not been very good for them but if you know at least last two quarters we starting to see some growth. uh we we seeing uh NPA going down substantially. So that's one area that we should look at. But again the challenge of uh uh you know higher interest rates uh if they come through is going to be there. So that's something that we have to sort of evaluate. So not something that you can say uh you know that that you can be blanketly bullish on right now. M and uh since you also did allude to IT sector saying that uh you know the midcap sector definitely outperformed in the IT space let's try and understand what's happening here. Uh there was already you know we went into Q4 earnings of IT sector with very low expectations um especially because of the large underperformance that was already being seen. uh starting off with the large cap uh companies um reporting bleak outlook and guidance some of them missing their guidance for FY26 that disturbed the entire sentiment but uh rightly pointed out by you that when the midcap sector started to perform and started to report their numbers that's when the sentiment started to change and what we are looking at in the markets over the last couple of weeks is that there is a growing sentiment of people purchasing the beaten down IT sector at this point in time how are you looking at what's transpired in Q4 earnings what could be in the outlook and how should investors be going forward >> so again I mean like I said if you look at the numbers say from companies like a co-forge or persistent and Oracle financial uh you know they have done far better than the the top four five companies like Infosys and TCS and Vipro HCL tech right where where VR HCL Techch have struggled to show uh TCS al also you know they've struggled to show you know doubledigit growth uh you look at these uh you know co forge persistent etc where they've they've done pretty good numbers you know over 30% kind of growth uh at the pat level so mid-tier IT looks to be in a much better position today uh than the larger ones H and what about PSU versus private banks? How would you look at those?

[00:11:43]uh PSU banks again you know obviously uh numbers for some of them have been quite good right but the bigger problem is uh within the PSU bank space also there's a lot of divergence so banks like you know bank of Maharashtra uh Indian overseas bank these have done really well whereas the really large ones like uh state bank of India Canada bank uh bank of boda union bank uh PNB they have sort of uh done you know between 0 to 10 12% uh kind of growth so that is where the dichotomy is again there the smaller ones the midcap banks in PSUs have done significantly better compared to the larger ones >> okay uh let's also focus on the pharma sector as a whole how have you seen the pharma sector uh report its numbers in Q4 large caps visa v mid caps there. Um you know of course uh we have CDMO plays, we also have the healthcare segment plays, visa v the frontline OEMs. How would you look at what's really transpired in Q4? What impressed you? Uh we're also seeing an increased amount of retail investors interest in the pharma stocks over the last couple of months. The stocks have been gaining a lot of traction. Um what do you think lies ahead here for FI272?

[00:13:09]>> I think pharma continues to do well. You have to take a you know company specific view because uh it depends on the molecules that they're doing or the or the drugs that they're doing which markets they are targeting whether it's more of generics versus uh uh you know I mean what kind of therapy whether it's uh uh you know chronic versus acute which kind of markets US non- US so domestic so lot of these you know make difference uh uh when you look at pharma. But again, if you look at the numbers, extremely good numbers coming in from a lot of companies. You look at you know fairly large companies like Lupin, fantastic growth coming. You looked at uh you know Glenmark again you know quite good numbers. Mankind Pharma domestic focused very good numbers. Zidus Loris uh you know all of these have come out with fairly fairly good numbers. So overall I think pharma looks to be you know in a in a in good shape. Uh again you have like I said you have to take a stock specific call because there are companies like Dr. which has not done very well you know and it's very very large company >> right Alchem Lab again very good very large company uh you know lackluster results so you have to sort of uh take your pick on uh what kind of company you're looking at >> absolutely any key numbers that impressed you specifically or companies that you are focusing on specifically is it healthcare is it OEMs or is it CDMO what are you focusing on within uh this entire pack. I think the entire pack I'm interested I I know I've been you know pharma uh we've been invested in pharma throughout I mean I I keep some companies always in the portfolio because some pharma companies continue to sort of do well uh you know at most of the times uh I I liked a lot of companies like I said I mean Lupin has done really well lipka has done well Glenmark uh even Apollo hospitals you know in the hospital space Apollo uh max all of them have done uh you know reasonably well. So overall pretty pretty positive on the on the sector.

[00:15:28]>> Okay, got that. Let's also now focus on uh the auto space at large uh to see how they have reported the numbers. Of course, some of them stood out in terms of performance this time. We've seen even the largest car maker come out with strong numbers. Marujuti Suzuki crossing 52,463 crores in revenue. uh we've seen Eminem hit about 54,984 cr rupes of revenue as well. High passenger vehicle volume was uh seen although that was offset by the rising material costs or the raw material costs that the companies have seen. Margins definitely came under some pressure. Uh there was also an impact on the entry level names. We're also getting all of these numbers um now on the monthly basis for May today. Bajage auto Eminem have reported their numbers. Exports are picking up for a lot of them as well.

[00:16:14]Let's try and decode what's happening in the auto space. um you know last couple of months um or let's talk about the last quarter um and the quarter before that the entire focus was on GST benefits leading to a lot of volume growth for these companies a surge in demand and suddenly things have changed because of the West Asia crisis and the cost inflation that is forcing all these companies now to resort to multiple rounds of price hikes uh that they have taken already and they are about to continue to take as well and that's what uh trend is emerging. How would you look at the auto space?

[00:16:51]>> I think autoplay space we seeing initial signs of uh you know the the euphoria sort of slowing down >> and even within the auto space I think two wheelers have continued to do well.

[00:17:07]Look at the numbers of Bajage Autos you know fantastic numbers.

[00:17:10]>> Uh Hero Motor Coup has done well. TVS Motors has done well. uh compared to that you know the the passenger vehicle companies uh especially you know Marauti you mentioned Marauti has shown very good topline growth but struggled with the bottom line because you know cost gone up >> uh compared to that you know probably Mahindra has done well but again Mahindra has it's it's not a pure uh auto company uh but overall I think if I look at how the passenger car segment is going uh uh you have Mahindraas which are picking up. Tata is doing well especially now with the focus for people buying EVs. I think you know Tata Motors is uh and and MG. So you know these companies likely to do well. two wheelers continues to be a sweet spot because uh the the migration from uh petrol based motorcycles and scooters and bikes to uh EV1s is actually happening uh pretty fast. So we can see that in the numbers for all the companies whether you know listed unlisted you can see those getting reflected. So that that's the space I would sort of be more keen on.

[00:18:32]Okay. Um let's also talk about commodities. You were also talking about the fuel sector initially. So the oil and gas space, the energy sector at large. Um you know, how would you look at what's happening here? Especially this has been in the thickest of action because of what's transpired on the global crude oil prices. Um how are you looking at this entire energy uh space and what is the outlook? How has it performed in Q4 and what's the outlook?

[00:18:59]Obviously performance uh you know has been quite good for most of the uh the oil and gas companies. Uh OMGC has done well, IOCL, H, HPCL, all of them have done well. Oil India uh but overall I think uh this is a space which is very very uh dependent on global macros on policy decisions. So uh not something that I am very comfortable always uh you know investing because it's it's too uh too dependent on uh or or I mean very little control for the company or the management to do anything. It's that they're too much at the mercy of uh you know exter externalities. So that's the problem that I have always with oil and gas. uh if I look at say you know the energy overall uh space you know power if I include that then fantastic results from most companies in that entire power you know value chain whether they are transformers whether they are cable companies whether they are generation companies entire TN you know companies like BHL GNOVA Hitachi very Very good numbers.

[00:20:20]>> Absolutely. So in the end G if I have to ask you for what lies ahead you already talked about how Q1 you will be a little cautious looking at what the major impact will come across the sectors but despite that where do you see the silver lining? If an investor has the earnings focusled uh investment strategies, what is it that they should focus on uh for Q1, Q2 and where should they completely avoid looking at this point?

[00:20:48]See, I think you know the safer areas would to to look at right now would be uh pharma, would be uh metals, uh power, uh manufacturing, capital goods, uh pretty much these these areas, you know, are what I would be looking at. Even even some specialty chemicals are beginning to look interesting. So these are areas which I think uh you know we should concentrate on in the next 3 to four months.

[00:21:23]>> Okay. So pharma um power metals and specialtity chemicals those are the four sectors that uh um you know hope to show some promising results even going forward from here. That's where some focus should be over the next quarter.

[00:21:37]Thank you so much Abhishek for being with us on this special edition and for decoding uh what has transpired as far as Q4 earnings is concerned for all our viewers. Thank you so much for being with us.

[00:21:52]All right viewers, we'll wrap it up on that note. Thank you so much for taking the time out and uh of course the markets conversation and a lot of interesting u you know chat as far as gold is also concerned coming up for you right up next.

[00:22:09]All right.