India Inc's profits impress in Q1 FY15

1,204 companies reported a 33% jump

India Inc has a pretty impressive report card to show for the first quarter of this fiscal.

According to data compiled by Care Ratings, over 1,204 companies have registered a substantial growth of 33.4% at Rs 62,040 crore in net profit for the first quarter of this fiscal. This is against 8.8%, at Rs 46,792 crore, registered in the corresponding quarter of fiscal 2014.

Net profit margin has also recorded an increase from 9.5% in Q1 FY14 to 11.3% Q1 FY15.  During the quarter, total net sales grew 12.8% at Rs 5,54,426 crore against 4.8% or Rs 4,91,689 crore in Q1 FY-14.

"Some sectors like Pharma and IT have been consistent performers and have done distinctively well. This growth is also due to a better performance of the economy," said Deven Choksey, MD, KR Choksey Shares & Securities.

This week, India Ratings & Research, part of the Fitch Group, raised its 2014-15 gross domestic product (GDP) growth forecast to 5.7% from 5.6% that it forecast in April this year.

It added that the industrial GDP growth would improve to 5.1% from earlier estimates of 4.1%. Industrial growth stood at a mere 0.4% in 2013-14. The Index of Industrial Production (IIP) grew 4% over April-May 2014.

"Although it is still early to call it a trend, we believe this could be the beginning of a broad-based industrial recovery," India Ratings said.

The agency said it expects WPI (wholesale price index) as well as CPI (consumer price index) based inflation to decline to 5.4% and 7.9%, respectively in 2014-15.

Industries including 1,204 companies
	Q1 FY14 (in Rs cr)	Q1 FY15 (in Rs cr)
Net sales	4,91,689	5,54,426
PAT	46,792	62,040
Net Profit Margin (%)	9.5	11.3
Growth (%)
Net sales	4.8	12.8
PAT	8.8	33.4
Source: Care Ratings

"We believe both revenue and disinvestment targets are optimistic. A large part of non-plan expenditure is of committed nature and it is quite likely that the government will overshoot the budgeted targets," it said.

Current account deficit is estimated to widen to $48.7 billion (2.2% of the GDP), mainly due to improved industrial growth outlook which will boost imports. However, the financing of the CAD may not prove challenging due to higher capital inflows, the agency said.

"In fact, we are expecting accretion to our foreign exchange reserves in 2014-15 which should lead to the rupee appreciating to 57-58 per US dollar by the end of 2014-15."

Industry experts said that a stable currency and interest rates have aided a better performance for the companies and going forward, earnings could see a 15-20% growth.

"We believe that the economy has bottomed out and going forward, earnings would see a 15% plus further growth," said Choksey.

Andrew Holland, CEO, Ambit Investment Advisors said he sees the earnings growth at 20% plus going forward.