Early bird Q3 results fail to impress

Results declared so far show that India Inc's profits as well as sales have taken a beating for the quarter ended December 2008, compared to the corresponding quarter of the last financial year. However, the corporate sector has performed better than expected when compared with the numbers of the previous three quarters.

The 228 manufacturing and services companies, which have posted their results till date, have shown net profit growth of 35.28 per cent for the quarter. The net profit of the 178 common companies on this list grew 31.23 per cent.

Though way short of the 57.18 per cent growth for the quarter ended December 2006, it is just a tad lower than 34.78 per cent recorded by these 178 companies for the quarter ended September 2007.

The 228 companies have reported sales growth of 21.44 per cent for the quarter ended December 2007. For the 178 common companies, sales growth of 20.11 per cent for the quarter is way below the 35.92 growth for the year-ago quarter, though it is sharply up from 12.88 per cent in the previous quarter.

In fact, it is higher than 19.06 per cent during the quarter ended June 2007 and 15.49 per cent during the quarter ended March 2007.

The reason why the numbers for the recently-concluded quarter compare badly with the year-ago quarter is simple: It had shown sharp growth on a low base of December 2005 when the net profit of these 178 companies had grown 5.9 per cent and their sales had grown 18.72 per cent, primarily due to the poor performance posted by Reliance Industries.

However, it is too early to draw any firm conclusion on the basis of these 228 results. The early bird results comprise four of the five frontline software firms and Reliance Industries.

The company has posted strong results (net profit up 26 per cent and sales up 22.7 per cent) for the quarter on the back of gross refining margins of $15.4 per barrel, which is the highest among its peers.

The frontline software services firms "" Tata Consultancy Services, Infosys Technologies, Wipro and HCL Technologies "" aggregated sales growth of 21.1 per cent which is less than half compared to the average sales growth of 51.3 per cent recorded during the quarter ended September 2006.

The rupee started appreciating during the same time last year, and the revenue growth dipped to around 37 per cent during the quarter ended December 2006. It further fell to between 21 per cent and 23 per cent during the first three quarters of the current financial year.

The rupee appreciation also had a telling impact on the profit margins of software services companies. The top four software services companies studied here posted net profit growth of 17.9 per cent "" their lowest since 2001.

After the appreciation of the rupee, their net profit growth rate had decelerated from 47.8 per cent during the quarter ended March 2007 to 34.6 per cent during the quarter ended June 2007 and 20.3 per cent during the quarter ended September 2007.

Going forward, the trend in the automobile sector will be mixed, with flat growth likely for two-wheeler companies and a decline in net profit for heavy commercial vehicle companies.

The companies in the pharmaceutical, metal, cement and telecom sectors are poised for a significant slowdown in growth compared with the previous quarter.