The emerging recovery in the rural hinterland, signalled by high-frequency indicators, is gaining further credence from the fourth quarter earnings.
Companies largely catering to the rural segment have demonstrated an impressive show on the volume front, despite an overall revenue slowdown for India Inc. in the final quarter of fiscal year 2024-25. However, these firms struggle with a slowdown in profits, which is building pressure on their margins.
A latest Mint analysis of 32 companies within the Nifty Rural Index which tracks the performance of stocks from the Nifty 500, representing the rural theme, revealed that their aggregate revenue grew by 4% year-on-year during the fourth quarter of the just-concluded fiscal year. While this top-line growth appears modest in isolation, it actually follows a contraction in the previous quarter, offering glimpses of a rural resurgence.
The analysis, based on standalone data from the Capitaline database, examined the latest quarterly financial performance of 492 listed companies that have released their results so far.
Unlike their rural counterparts, a significant number of companies saw a steady deceleration in revenue growth across all four quarters of 2024-25. In the final quarter, these firms registered just 3% growth compared to the same period in the previous fiscal year, clearly indicating that the rural segment continues to demonstrate resilience against the backdrop of generally subdued demand.
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Sustaining demand
Over the past three to four quarters, the rural economy has maintained considerable momentum despite a broader deceleration in urban areas. This strength emerging out of rural hinterlands has helped sustain overall demand.
While rural businesses showed resilience in revenue growth, their bottom line numbers depict some disappointment. Net profit growth for rural-themed companies slowed to 7% in the March quarter, down significantly from the robust 40% profit expansion recorded in the December quarter.
Also read | Rural revival: Is it premature to celebrate?
Meanwhile, the rest of Indian corporates – those outside the Nifty Rural Index – saw their profit growth improve from 6% in Q3 FY25 to 11% in Q4 FY25. Interestingly, further analysis of net profits as a share of revenue shows that margins for companies representing the Nifty Rural Index have declined in Q4, while margins have risen for the rest of India Inc.
A detailed company-by-company analysis reveals that 12 out of the 32 Nifty Rural Index companies that have released their March quarter financial results experienced either declining or stagnant net profits compared to the same period last year.
Poonawalla Fincorp, SBI card, and Supreme Industries recorded some of the most significant declines in net profits during the March quarter, contributing to the overall muted profit growth for Nifty Rural companies.
On a more positive note, 17 other companies delivered robust double-digit profit growth in the March quarter. This growth was led by exceptional performers including Dalmia Bharat, Bandhan Bank, Tata Communications, and ICICI Prudential Life Insurance, all of which reported more than 100-fold increases in net profits compared to the same quarter in the previous fiscal year.
This is the ninth part of a series of data stories about the ongoing Q4 earnings season. Read previous parts of our earnings series here.
