Net profit after tax (PAT) of listed companies in the quarter ended June 2024 is of the order of Rs.3.4 trillion. This is 6.9 percent higher than the Rs.3.2 trillion profits made in the year-ago quarter that ended in June 2023. The year-on-year (y-o-y) growth in PAT has slowed down quite substantially. It was 29 percent and 13 percent in the preceding two quarters. The slowdown of profits is concentrated in, though not limited to, the manufacturing sector.
PAT growth has slowed down, and its level has stagnated. At Rs.3.4 trillion in the June 2024 quarter it was almost the same as it was in the preceding, March 2024 quarter. This is stagnation at a highly elevated level. Average quarterly PAT of listed companies has more than quadrupled in four years from an average of about Rs.0.76 trillion during the five years till 2019-20 to an average of Rs.3.24 trillion in 2023-24 and further to Rs.3.4 trillion in the June 2024 quarter.
The stagnation in PAT emanates essentially from its fall in the manufacturing sector. The manufacturing sector’s PAT has been sliding since March 2023, but the fall in the quarter of June 2024 is much steeper. Preliminary estimates show that the sector’s PAT has fallen from Rs.1.21 trillion in the March 2024 quarter to Rs.1.06 trillion in the June quarter. This 12 percent fall could narrow a tad with some revisions but not much.
Within the manufacturing sector the fall in profits is concentrated in petroleum refining. The net profit of this sector had peaked in the quarter of June 2023 at Rs.0.42 trillion. By the March 2024 quarter this was down to Rs.0.25 trillion and in the June 2024 quarter PAT went down further to Rs.0.14 trillion. A similar fall is seen oil and gas mining companies.
The drugs and pharmaceuticals industry saw correction in its PAT from an extraordinary spike to Rs.0.15 trillion in the quarter of March 2024 to Rs.0.12 trillion in the quarter of June 2024.
Besides manufacturing, a major contributor to the corporate sector’s fall in PAT is a correction in the construction industry. Listed construction companies had reported a sharp increase in PAT from an average of less than Rs.0.05 trillion per quarter to Rs.0.10 trillion in the March 2024 quarter. This reverted to Rs.0.05 trillion in the June 2024 quarter. Correspondingly, steel and cement profits have also declined sequentially in the June 2024 quarter. And, so have machinery sector’s profits.
Compared to the March 2024 quarter, even banks have reported a fall in PAT in the June 2024 quarter. But these are much higher than their year-ago levels and seem to be still on a steeply rising trajectory.
Consumer goods companies have reported a sharp increase in profits. Much of this is a recovery from the fall in the previous quarter. This is particularly true for the personal and home care products industry, and to a smaller extent for the gems and jewellery industry. The domestic appliances industry on the other hand has been doing quite well more consistently. Profits of the automobiles industry continues to remain lower than the peak obtained in the December 2023 quarter.
Non-finance services companies have been the bright spot in the June 2024 quarter. This segment produced Rs.0.56 trillion of PAT in the June 2024 quarter which was 26 percent higher than the previous quarter and 35 percent higher than in the year-ago quarter. Part of this should be discounted because it includes proceeds from the sale of Gulf Cooperation Council Business of Aster DM Healthcare to its subsidiary for a consideration which was paid in the form of dividends of the order of Rs.0.06 trillion. But wholesale and retail trade companies have reported good growth in profits in the June 2024 quarter. Compared to a year ago, their profits were up by 36 percent and sequentially, the profits were 30 percent higher. Retail trade in particular has done quite well. IT companies disappointed.
It’s been a mixed bag of a few sectors recording growth in PAT and others seeing it shrink in the June 2024 quarter. The net result was stagnation in profits. Stagnation was seen in the quarter of September 2023 and in several quarters in 2022 as well. The trajectory, however, has continued to remain of an aggressive growth in profits.
