Corporate sales growth accelerates to 7.2% in FY25 as services outshine manufacturing amid rising input costs: RBI

India’s listed private non-financial companies reported a modest recovery in sales growth in 2024–25, supported by strong demand in the services sector and a rebound in key manufacturing segments, even as input cost pressures persisted, according to data released by the Reserve Bank of India (RBI) on Thursday.

Based on the abridged financial results of 3,902 listed non-government non-financial (NGNF) companies, the RBI said sales growth improved to 7.2% in FY25, up from 4.7% in the previous year.

Sectoral trends

Sales in the manufacturing sector rose 6%, up from 3.5% last year, driven by robust performance in automobiles, electrical machinery, food & beverages, and pharmaceuticals. However, companies in the petroleum and iron & steel sectors continued to drag down the overall average, with sales contracting in these segments.

The information technology (IT) sector also saw improved momentum, with sales growth rising to 7.1% from 5.5% in FY24, despite persistent global demand uncertainties.

Meanwhile, non-IT services companies posted strong double-digit growth, led by increased activity in telecommunications, transport & storage, and wholesale & retail trade.

Input cost pressures weigh on margins

Along with higher sales, input costs also rose notably. Manufacturing companies saw their raw material expenses climb 6.6%, pushing the raw material-to-sales ratio up to 55.7%, from 54.2% a year ago. This indicates continued cost pressures amid volatile commodity prices and lingering supply chain constraints.

Staff costs increased across sectors. Manufacturing firms recorded a 10% rise in wage bills, while IT and non-IT services companies saw increases of 4.4% and 12%, respectively. However, the staff cost-to-sales ratio remained steady for manufacturers and eased slightly for services firms, possibly indicating gains in productivity or pricing power.

Profitability under strain

Rising input costs curbed pricing power, especially in manufacturing. Operating profit growth for manufacturers dropped to 6%, from 12.4% in FY24. Non-IT services saw profit growth moderate to 15.9%, while IT companies posted a slight improvement to 6.1%.

Consequently, operating profit margins declined across sectors. Manufacturing margins dropped 20 basis points (bps) to 14.2%, IT margins declined 80 bps to 21.9%, and non-IT services margins slipped 30 bps to 22.1%.