Earnings of Nifty 50 companies in the December quarter saw a year-on-year decline for the first time in 13 quarters, despite a double-digit increase in revenue. Excluding certain sectors, aggregate revenue surged by 10%, marking the first double-digit rise since March 2023, while profits dipped due to the one-time impact of India’s new Labour Codes.
Operating profit showed a 7.5% growth compared to the previous year, an improvement from the 6.1% in the September quarter. However, aggregate net profit for 37 Nifty 50 companies dropped by 8.1% year-on-year, the first negative growth since September 2022, as per industry data.
The decline in profits was linked to the one-time accounting effect of India’s new labour codes, mandating a raise in basic salary to 50% of the total cost-to-company, leading to increased gratuity provisions. This change reduced overall profit after tax by around 5%, with the technology sector facing an estimated 13% decline, analysts noted.
Revenue growth accelerated in Q3 FY26, rising from 16% to 20%, notably post the GST cut implementation. The transition to the new labour code in November brought alterations in wages, workplace safety, and social security measures.
TCS, Infosys, and HCL incurred over Rs 4,373 crore in one-time charges due to the new rules’ implementation, contributing to a double-digit profit moderation for the quarter, as reported by multiple sources. In the banking sector, the RBI’s intervention on priority sector lending and adjustments in the agriculture book impacted earnings, though analysts viewed these as short-term factors.
