The earnings season has got off to a sedate start with no big surprises so far. Although topline growth has been fairly good, the aggregate operating and net profit numbers have been subdued, partly impacted by the new Wage Code rules.
The results for the December 2025 quarter – the peak festive and wedding season – do not suggest any big jump in consumer spending, despite the income tax giveaways and cuts in the GST rates. Of course, the split in the festive season, between Q2 and Q3, would have impacted business somewhat. Exporters have been gainers in a quarter in which the rupee depreciated sharply.
For a sample of 284 companies (excluding banks and financials, HPCL and BPCL), net profits for Q3FY26 were up 5.1% year-on-year (y-o-y) – that’s the slowest growth in at least four quarters and despite a strong 12.6% rise in net sales.
Wage Code Squeeze
Operating profit margins contracted by about 90 basis points, thanks to expenses having risen by 13.8% y-o-y, leaving the increase in operating profits at just 7% y-o-y.
The good news is that the IT pack did fairly well with managements more hopeful now of demand picking up and of winning more deals. Clients are taking decisions more quickly, they observed. At Tata Consultancy Services (TCS), the value of wins moderated during Q3FY26 but the commentary suggested improving momentum in demand. Infosys raised its full-year revenue guidance also, sounding optimistic on discretionary spends.
Among the big disappointments has been Reliance Industries with the company reporting a growth in consolidated operating profits of just 5% y-o-y. Analysts observed that the Ebitda (earnings before interest, tax, depreciation and amortisation) for the organised retail business was up only 1.1% as revenue growth was subdued.
Discretionary Demand Dilemma
Ultratech Cement, on the other hand, has posted a good set of numbers with the consolidated Ebitda jumping 36% y-o-y, beating estimates handsomely, on the back of strong grey cement volume growth and market share gains. Profits are up 23% y-o-y after adjusting for the impact of the labour code rules. JSW Steel’s Q3 results were ordinary and missed analysts’ estimates. While revenues rose 11.1% y-o-y, the operating profits went up by 16.4%, lower than expectations, primarily due to higher raw material costs and the impact of some inventory liquidation.
It was a sedate quarter for retailer Avenue Supermarts with the like-for-like growth moderating to just 5.6% versus 8.3% in the base quarter, an indication of the pressure on basket sizes and discretionary categories. Analysts have pointed out that store productivity remains at pre-Covid levels. Again, total sales at Shoppers Stop were flat y-o-y, leading to a 52% fall in profits before tax. Business at the retailer has been impacted by uneven discretionary demand, the shift in the festive season and high pollution levels in North India, the management observed. Both gross and Ebitda margins have contracted.
FMCG player Godrej Consumer Products turned in a good show with the India revenues up a strong 11%, backed by a good 9% increase in volumes. While gross margins contracted 120 basis points, Ebitda margins expanded by 220 bps as costs on some items were reined in. Food delivery player Eternal’s revenues surged 202% ahead of estimates while profitability also improved.
Cipla’s results were unimpressive as the pharma major posted flat revenues for the December 2025 quarter. The gross margins and Ebidta margins both contracted sharply – by 520 bps and 1,040 bps – as expenses on R&D increased and that drove down both operating profits and net profits. Dr Reddy’s Laboratories posted decent results as revenues grew by about 4.5% y-o-y with organic sales growth in India at 17%. However, both gross and Ebitda margins were under pressure, driving down the operating profit by 16%.
Waree Energies posted a good set of numbers with revenues climbing 119% y-o-y and Ebitda by 168% y-o-y, driven by higher volumes and a better product mix.