Written By: Aanchal Saini
It was one of those slow, rain-drenched evenings when everything around you feels like it’s been dipped in silence. Meera, a seasoned investor with a love for balance sheets, sat by the window sipping her coffee. The world outside buzzed with stock market news, yet her focus was on one thing, RGOLD Industries’ latest quarterly results.
Headlines screamed: “Profits Up 50%! Stock Hits New High!” News anchors looked thrilled. Social media echoed the hype. WhatsApp groups were flooded with “Buy Now!” messages.
But Meera didn’t move.
She had seen enough over the years to know that whenever a company’s profit graph suddenly shoots up without warning, the answer almost never lies in the headline.
The First Red Flag: A Profit Without Growth
As she opened the financial report, the first thing she checked wasn’t the profit. It was revenue.
And there it was. RGOLD’s core business – selling jewellery was flat. Sales hadn’t moved at all. If anything, they were a little weaker than last quarter.
So the question stared her in the face: How can profit jump 50% if sales haven’t budged?
She traced her fingers slowly down the income statement. Past the revenue. Past the cost of goods. Past operating profit.
Then she saw it.
One line, tucked neatly below the main business income: Other Income.
And that number had nearly tripled.
What Is Other Income And Why It Matters
To understand what Meera just spotted, let’s step back for a second.
Every company has a core operation. A bakery bakes bread. A car company sells vehicles. An IT firm sells software or services. That’s called Operating Revenue, the primary way a business earns.
But outside of that, companies can earn through:
– Renting out unused office spaces
– Interest on fixed deposits or debt investments
– Gains from mutual funds or stock sales
– Dividends from other companies
– Foreign exchange gains
– Selling old property or equipment
All these fall under Other Income, money that wasn’t earned through the company’s core engine.
Now here’s the catch.
Other Income isn’t illegal. It’s not shady. In fact, in many large companies, it’s a smart way of using idle assets.
But what makes it dangerous is that it’s often non-recurring.
A jewellery business might sell an old warehouse once and record a big gain. But that warehouse is now gone. You can’t sell it again next quarter.
So when Other Income becomes a major reason behind rising profits — it’s time to dig deeper.
Back to RGOLD: What Really Drove That 50% Profit Spike?
Meera flipped to the notes in the financials, the section most retail investors ignore.
There it was in black and white:
– The company had sold a warehouse, one-time gain.
– They booked profits from mutual fund investments, market-driven and unpredictable.
So, the summary was simple:
- The jewellery business hadn’t grown.
- They got lucky with mutual fund returns.
- And they cashed in on an asset sale.
That 50% profit surge? It was built on sand.
She leaned back. No excitement. No panic. Just clarity.
Because she knew – next quarter, there’s no warehouse left to sell. And mutual fund returns can’t be booked every three months.
Clean Profit vs Cosmetic Profit – A Tale of Two Companies
Let’s put RGOLD aside for a second. Consider two well-known names:
TVS Motor Company (June 2025 Quarter)
TVS reported a 34.9% increase in net profit, reaching ₹779 crore. Sounds great, right?
But here’s the gold: That growth came from the core business.
- Two-wheeler sales rose 17%
- Premium bikes like Apache drove demand
- Exports jumped nearly 40%
- Electric vehicles grew 35%
- EBITDA margins improved from 11.5% to 12.5%
No asset sale. No tax trick. No Other Income surge.
That’s what clean profit looks like – consistent, scalable, and earned from real customers.
Bharti Airtel (Q4 FY25)
Contrast this with Bharti Airtel.
Net profit shot up to ₹11,022 crore from just ₹2,072 crore a year ago, over 5x growth.
Impressive?
Not really.
- A big part of that jump came from a tax benefit adjustment
- Another portion was the accounting treatment of tariff hikes
Both were one-time gains, they won’t repeat next quarter. Airtel didn’t suddenly become five times more profitable. It just had a lucky accounting quarter.
When Is Other Income a Red Flag?
Not every instance of Other Income is bad. For companies like Infosys or TCS, who sit on huge cash reserves, interest from FDs or bonds is regular, predictable, and practically part of the business.
But here are your warning signs:
- Other Income suddenly jumps quarter-over-quarter
- It forms a large chunk of total profit
- Core sales are flat or declining
- Notes to accounts mention “gain on sale of asset” or “market-related gains”
When these appear together, pause and investigate.
Investor Takeaway: Always Look Under the Hood
The next time you hear “Profits up 80%!”, don’t just cheer.
Check:
- Is the core revenue growing?
- Has Other Income changed drastically?
- What do the notes to accounts reveal?
- Can the same income repeat next year?
If the answer is no, you’re probably looking at cosmetic profit, not real business strength.
Remember this line and you’ll never go wrong:
“Core operating profit is the heartbeat of a business. Everything else is background music.”
And What Happened to RGOLD?
Three months later, the company released its next results.
No warehouse to sell. Mutual fund markets had cooled. Jewellery sales still stagnant.
The result? Profit dropped. Stock tanked.
Investors who chased the headline were shocked. But Meera? She had already moved on — she never bought the stock.
Because she wasn’t investing in excitement. She was investing in earnings that repeat.
Final Word: Don’t Just Ask “How Much?” – Ask “From Where?”
In investing, curiosity protects your capital. Every profit figure has a story behind it. Your job isn’t to believe the headline, it’s to read the fine print.
Not all profit is equal. Some are repeatable. Some are not. The sooner you learn to tell the difference, the better your investment decisions will be.
So the next time you see a jaw-dropping earnings announcement, don’t just ask:
“How much did they make?”
Ask this instead:
“Did they earn it, or just get lucky?”