Q1 earnings begin on a strong note as banks fuel double-digit growth

ET Intelligence Group: The early June quarter earnings trend has been marked by double-digit growth in revenue and profit, driven largely by most of the big banks and stable year-on-year performance by the IT pack.For a common sample of 164 companies, revenue grew 17.5% on a low base a year ago, the fastest in at least nine quarters.Net profit rose 14.5% year-on-year, marking a second consecutive quarter of double-digit growth. In the year-ago period, revenue and profit had risen by 4.7% and 11.5%, respectively.The sample's operating margin was under pressure due to higher input costs.AgenciesOperating Margin ContractsFor the total sample, operating margin contracted to 20.9% in the June quarter from 26.9% in the year-ago quarter. Excluding lenders, the sample's operating margin fell to 14.7% from 17.3% by a similar comparison. The proportion of raw material cost in sales for the truncated sample shot up to 33.3% from 29.8% a year ago, reflecting input price inflation due to geopolitical conflict.Some banks and finance companies reported strong numbers, boosting overall net profit growth. Excluding lenders, the sample's net profit growth shrank to just 1.2%. The share of banks and finance companies in the total sample's net profit rose to 56.9% in the June quarter from 51.3% a year ago.The total sample's profit growth was muted by Reliance Industries Ltd (RIL) numbers. Net profit at the country's largest company by revenue and market cap fell 22.4% year-on-year to Rs20,946 crore. Excluding RIL, the sample's net profit surged to 24.1%. The lower profit was attributable to an exceptional gain of Rs 8,924 crore recorded in the year-ago quarter on the sale of RIL's stake in Asian Paints.At the beginning of the results season, analysts had anticipated double-digit growth in the aggregate net profit of the Nifty 50 companies, aided by banks and finance companies. "The overall earnings growth is anticipated to be healthy, anchored by financials, metals, and capital goods companies," Motilal Oswal Financial Services said in a preview report.Clarity on the financial trend will emerge as more companies from across sectors declare quarterly numbers in the coming weeks.