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| Skewed performance by India Inc in September quarter |
| BS Research Bureau / Mumbai Nov 08, 2011, 00:49 IST |
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Banks, IT and FMCG companies do well; metal, power, capital goods sectors trail.
India Inc’s performance would have suffered severely in the second quarter, but for 10 companies across sectors that saved the day.
A total of 1,457 companies declared quarterly results for this season, reporting the sharpest fall in net profit in the past 11 quarters. The aggregate net profit of these companies declined 12 per cent year-on-year, lowest since the December 2008 quarter, despite a 23 per cent growth in operational income.(Click here for QUARTERLY PERFORMANCE)
Aggregate net profits of the sample companies were Rs 67,633 crore in the quarter ended September 2010. This fell to Rs 59,265 crore in the second quarter of 2011.
The star performers were Oil and Natural Gas Corporation, Reliance Industries, NTPC, NMDC, Infosys, ITC, ICICI Bank, Hindustan Zinc, HDFC Bank and Hindustan Unilever. These 10 posted an average net profit growth rate of 32 per cent.
The combined net profit growth of the 1,457 companies, which account for 66 per cent market capitalisation of all actively traded stocks on the Bombay Stock Exchange, would have declined by a third if these 10 were excluded from the list.
Of the 30 Sensex constituents, 18 companies declared their results and 15 of these posted positive growth, while four saw a fall in earnings. These companies have reported an average 17 per cent growth in net profit.
The corporate results are in line with analyst expectations. Higher input costs, rising interest burden, a global economic slump and a fall in rupee value pinched the bottom lines in this quarter.
The sharp fall in the rupee, which depreciated around 10 per cent against the dollar in the period, significantly impacted the earnings of companies with unhedged foreign currency liabilities. Companies with foreign currency loans such as Bharti Airtel, Bajaj Auto, Sesa Goa, Sterlite Industries, SAIL and JSW Steel have been impacted the most.
Raw material costs as a proportion of sales were 36 per cent in the September quarter, compared to 34 per cent in the previous year’s quarter, while the interest burden increased by 57 per cent during the quarter under review.
Sector-wise, fast moving consumer goods, IT, automobiles (mainly two-wheelers) and banks exceeded Street expectations. But, the quarterly numbers of oil marketing, cement, metals and capital goods companies were way below expectations.
TRENDS
“The performance of several large companies has been far ahead of expectations. Private sector banks and those in information technology have done well, while metal, power and capital goods sectors have disappointed. Most companies struggled to maintain their margins because of high commodity prices and rising interest rates,” said Phani Sekhar, fund manager-PMS, Angel Broking.
The next couple of quarters will be tough for the Indian economy. Inflation is at a 13-month high, but a cool-off is on the cards, as the impact of the second round of quantitative easing in America is wearing off on global commodities, and the global growth outlook is moderating, he added.
Meanwhile, profit margins of the sample companies, excluding 32 banks, declined by a little more than 350 basis points (bps) during the quarter. The operating profit margin fell 371 bps from 21.98 per cent in the September 2010 quarter to 18.27 per cent in the quarter under review. Net profit margins fell 352 bps, from 11.31 per cent to 7.61 per cent over the same period.
The two state-owned oil marketing companies, Bharat Petroleum and Hindustan Petroleum, reported combined net losses of Rs 6,594 crore, compared to net profit of Rs 4,232 crore in the same quarter earlier, due to the impact of high crude oil and product prices which could not be fully passed on to consumers.
The combined net profit of eight steel companies almost halved to Rs 1,536 crore from Rs 2,958 crore, on massive forex losses and increased raw material costs. These companies collectively made provisions of Rs 1,301 crore for forex losses.
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