One-Time Income vs. Core Operating Revenue: Why Indian Investors Get Fooled. | Quick ₹eads

by Karnivesh | 20 January 2026

An investor buys a stock after seeing "Net profit grew 250% year-over-year!" Three months later, it crashes 30%. Digging into the financials, they discover that while the core business barely grew, a ₹50 crore one-time gain from selling land out of ₹80 crore total profit had inflated the numbers. The core business was actually declining.

This scenario repeats constantly in India's stock market. The difference between core operating revenue and one-time income separates sophisticated investors from those who chase headlines and separates sustainable businesses from those papering over operational weakness.

What's the Real Difference?

Core operating revenue is money from your actual business selling products, delivering services, running operations. It's recurring, predictable, and represents the business engine. For Zydus Lifesciences, it's drug sales. For TCS, it's software consulting.

One-time income called other income or exceptional items comes from outside normal operations: land sales, subsidiary disposals, investment gains, lawsuits. These are fundamentally different: non-recurring, unpredictable, and often masking weak operations. Many Indian businesses, facing low growth, increasingly rely on one-time gains to boost reported profits.

The Real Indian Examples

Consider 3i Infotech. In Q2 FY26, the Mumbai IT firm reported ₹18.43 crore net profit. Impressive growth. But strip out ₹35.82 crores in other income, and operating profit was negative ₹5.29 crores. The company wasn't growing it was destroying value. Without one-time gains, it would report losses.

Eurotex Industries reported ₹181.10 lakh profit in Q2 FY2026 versus ₹307.49 lakh loss a year earlier a ₹488.59 lakh turnaround! But ₹332.73 lakhs came from selling plant machinery and land. Strip out asset sales, and the core business remained deeply unprofitable.

Even Reliance Industries reported ₹4,914 crores other income in Q3 FY26, helping offset operating margin pressure. For Reliance's scale, manageable. For mid-caps, this pattern signals trouble.

Why Earnings Quality Matters

The chart shows this starkly. A sustainable business generates most profit from core operations ₹100 crore of ₹105 crore total (5% one-time income). Next year, similar results recur.

A dependent company: ₹50 crore operating revenue but ₹40 crore other income (44% of total). Strip out one-time gains, and profitability collapses. Next year without these gains? Severe trouble.

This matters for valuation. When companies report high net profit but substantial one-time income, simple P/E ratios mislead. A ₹100 crore profit split as ₹80 crore operating and ₹20 crore one-time looks identical to pure operating profit at 8x P/E. But the first company is actually trading at 13.3x sustainable earnings.

Zydus Lifesciences illustrated this. Exceptional gains were 58% of net profit from subsidiary disposal. When analysts excluded them, the adjusted P/E jumped from 12x to 23.3x suddenly expensive, not a bargain.

The Red Flags to Watch

Watch for: (1) Other income growing faster than operating revenue. If core revenue grew 3% but other income jumped 50%, something's wrong. (2) Other income exceeding 10-15% of profit before tax. At this level, one-time gains drive profitability. (3) Asset sales, especially real estate. Often signal financial distress. Research on Indian manufacturers shows weaker-performing firms are more likely to sell assets than stronger ones. (4) Recurring "exceptional" items. If large one-time gains appear yearly, they're structural, not exceptional, suggesting management times asset sales to boost earnings.

The Investor's Framework

Calculate operating margins separately from reported margins. Compare operating revenue growth to net profit growth if revenue grew 5% but profit grew 50%, where did the extra come from? If it's one-time income, the company isn't actually growing.

Use this rule: if other income exceeds 15% of profit before tax, investigate thoroughly. Strip out exceptional items and recalculate valuations. A company trading at 8x reported earnings might trade at 15x adjusted earnings not a bargain, but expensive.

Why This Matters for India

India's accounting standards allow flexibility in categorizing exceptional items. Smaller companies sometimes stretch definitions to present better results. Economic slowdowns intensify temptation to use one-time gains masking deteriorating operations.

The highest-quality earnings come from core operations expanding profitably. One-time income is useful for understanding total cash in a given year, but dangerous for valuation or long-term decisions.

In India's diverse market ranging from profitable giants to struggling mid-caps this distinction separates winning investors from those chasing misleading headlines. When you see explosive net profit growth, resist buying immediately. Dig deeper: how much is sustainable core business expansion, and how much is one-time income masking deterioration? The answer determines whether you're investing in a business or catching a falling knife.