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| StatsGuru-02-November-09 |
| Business Standard / New Delhi Nov 02, 2009, 00:33 IST |
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Thanks to a sharp turnaround IN THE fortunes of PSU oil marketing companies due to lower oil subsidies, savings in overall costs of production and interest earnings on the cash piles it is sitting on, India Inc’s profits rose over 63 per cent in the September quarter. This is while topline sales fell 6.3 per cent. Once you net out sectors like oil and refining or steel where prices have fallen hugely over the year, the sales growth is a more respectable 8.3% — net profit margins also rise, from 8.9% to 11%. Sales and profits, however, tend to be concentrated and the top 10 firms account for over 40 per cent of sales/profits of our sample of 1,068 firms — remove these top 10 firms, and net profit margins for the sample fall around 30 per cent. Tax provisions are up 23 per cent due to the Minimum Alternate Tax. Most of the top companies — in terms of sales/profits — have seen a relatively poor quarter. Costs of raw materials to sales are down 80 bps on a year-on-year basis but are up 540 bps on a sequential quarter basis, suggesting the extra boost to profits from lower commodity prices in the quarter will reduce in the months ahead. Should that happen, though, it will boost the topline and bottomlines of commodity firms.
Investment levels have remained quite robust, growing around 34 per cent in 2008-09 — though data for 2009-10 is not available on a quarterly basis, the more than doubling in the order book position of capital goods firms in the September quarter suggests the momentum remains. The rise in profitability has meant a higher price-earnings multiple for India Inc (for the sample, it rose from 13.2 in the March quarter to 20.4 in September) and firms have used this opportunity to raise oodles of cash. As a result, the cash firms are sitting on has meant interest incomes have shot up and the money they have is enough to finance around 1.8 times the current levels of investment firms are making. All in all, the signs are encouraging.
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