Mumbai: Earnings of NIFTY 50 companies contracted year-on-year in the December quarter for the first time in 13 quarters, even as revenue growth returned to double digits, according to industry data. The divergence highlights margin pressures despite improving top-line performance.
Excluding banks, financial services, and oil and gas firms, aggregate revenue rose 10 per cent in the quarter — the first double‑digit increase since the March 2023 quarter, but aggregate profits dipped due to one‑time accounting impact of India’s new Labour Codes.
Operating profit grew 7.5 per cent year on year, up from 6.1 per cent in the September quarter and 5 per cent a year earlier.
Despite the revenue gains, aggregate net profit for 37 Nifty 50 companies fell 8.1 per cent from a year earlier, marking the first negative profit growth since the September 2022 quarter, industry data showed.
Analysts attributed the dip in profits to the one‑time accounting impact of India’s new labour codes, which require basic salary to be raised to 50 per cent of total cost‑to‑company, with a rise in gratuity provisions. The Labour Code changes trimmed overall profit after tax by roughly 5 per cent, with the technology sector estimated to have a 13 per cent dip, they added.
Meanwhile, revenue growth accelerated sequentially in Q3 FY26 from 16 per cent to 20 per cent, notably after the implementation of the goods and services tax (GST) cut.
Transition to the new labour code took effect in November and introduced changes on wages, workplace safety and social security.
TCS, Infosys and HCL together incurred over Rs 4,373 crore in one-time charges related to implementation of the new rules, contributing to double digit moderation in profit for the quarter, according to multiple reports.
In the banking space, the Reserve Bank of India’s (RBI) intervention on priority sector lending and agriculture book adjustments weighed on earnings but analysts said these were short-term factors.
AI image/IANS
—IANS
