Foreign arms' stellar role in Q2 show

The performance of subsidiaries abroad played a stellar role in India Inc’s performance for the second quarter ended September.

The consolidated results of companies that take into account the results of both foreign and domestic subsidiaries showed their net sales grew 22.2 per cent, while net profit grew a robust 70.4 per cent. Those with overseas subsidiaries (second quarter data available for 10 companies) aggregated a 791 per cent rise in net profit, compared to a paltry 12.7 per cent for companies with “domestic only” subsidiaries.

Overall, India Inc reported a net profit growth of 36 per cent. But without taking into account the contribution of oil marketing companies, the figure comes down to 11.3 per cent.

The best example of the role played by foreign subsidiaries is Tata Motors. Its consolidated net profit, at Rs 2,223 crore, was significantly higher than the Rs 433 crore from domestic operations. The company’s sales from Jaguar Land Rover rose 43 per cent, while its second-quarter margins turned positive at 11 per cent from a negative two per cent during the same period a year before. The company derived benefits from cost reduction, a good product mix and favourable exchange rate to increase operating margins by 680 basis points.

Though the standalone second quarter net profit of Tata Steel was higher at Rs 2,065 crore (up 128 per cent) against the consolidated Rs 1,979 crore, the company’s overseas subsidiary, Tata Steel Europe (formerly Corus) posted an operating profit of Rs 886 crore from an operating loss of Rs 1,802 crore in the corresponding period of the previous year. So, the company had a significant turnaround, with net profit of Rs 1,979 crore in its consolidated account from a loss of Rs 2,707 crore a year before.(Click for graph)

Sun Pharma saw the year-on-year net sales of Caraco Pharmaceuticals, its US subsidiary, increase by 25 per cent to $97.8 million from $55 million. The net loss reduced 0-fold to $0.3 million, from $3 million in the same quarter of the previous financial year.

It was not roses all the way, though. Tata Power disappointed, with its coal subsidiary abroad reporting 11 per cent decline in sales and a 20 increase in the cost of production. This was mainly due to heavy rain in Indonesia. However, including several one-offs, the reported net profit of Rs 680 crore was up 83 per cent. The consolidated net profit of the company included Rs 220 crore in foreign exchange gains, mainly related to the Mundra ultra mega power project, Rs 19 crore prior-period tax adjustments and Rs 188 crore from sale of non-core investments.

Beta Pharma, the German subsidiary of Dr Reddy’s Laboratories, also didn’t live up to its promise and revenues declined by four per cent due to lower contribution from back-end sales and price erosion caused by other factors.

Among domestic companies, Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Cairn India aggregated a second quarter net profit of Rs 11,111 crore, compared to Rs 458 crore in the second quarter of the previous year. These firms accounted for 11.4 per cent of the net profit of the 2,777 companies studied here. Among other domestic firms which helped India Inc to show a decent profit growth were NMDC, Bank of India and Shipping Corporation of India.