Energy plays the spoilsport

ONGC and Reliance Industries have marred an otherwise stellar performance by India Inc.

This is a perfect instance of the more not being the merrier. Euphoria raised by the first 111 companies with their last quarter results that marked average growth of 66.03 per cent in net profit on the back of 41.40 per cent rise in net sales has begun to subside with more results trickled in.

Thwarted by the disappointing show by the domestic oil behemoths, India Inc's performance for the quarter ended September only could put up a marginally better show than the first quarter (April-June).

The growth rate in profit has been marred by Oil & National Gas Corporation (ONGC) and Reliance Industries (RIL) even as commercial banks and cement, software, pharmaceuticals, diversified, aluminium and steel companies registered a robust growth.

The operating margin of 414 companies, which have come out with their results, has fallen 100 basis points (a basis point is one hundredth of a percentage point) to 24.39 per cent - the lowest in the last two comparable quarters.

It was 25.33 per cent for the September quarter in 2005 and 25.55 per cent in the June quarter 2006. However, If the oil, petrochemicals and software companies are excluded from the sample, the operating margin is up dramatically for the corporate India.

The margin for the two oil firms declined by almost 600 basis points compared with the corresponding quarter of the previous year and by 320 basis points over the June 2006 quarter.

Results of 414 companies for the September quarter witnessed 31.41 per cent rise in sales, 26.52 per cent hike in operating profit and 36.52 per cent increase in net profit. And the same companies, for the quarter ended June 2006, posted 32 per cent growth in sales, 28.42 per cent jump in operating profit and their net profit witnessed 29.29 per cent rise.

Analysts said it was too early to comment on the performance of the listed companies. However, they said the second quarter performance would be better for these companies.

Of the 414 firms, 178 companies outperformed the sales growth rate in the second quarter and 176 firms in the first quarter. In terms of net profit, 168 faired well in the second quarter compared with 178 firms in the first quarter. Interestingly, the number of companies registering a decline in sales remained the same at 60 during first and second quarters.

However, the number of firms registering decline in net profit come down from 74 in the first quarter to 63 in the second quarter. The number of companies which are back to the black, staging a turnaround, also increased to 58 in the second quarter compared with 42 in the first quarter.

These companies reported 29.77 per cent growth in sales and a robust 57.55 per cent rise in net profit in the second quarter compared with 26.45 per cent growth in sales and a 15.41 per cent growth in net profit in the first quarter.

The highlight of the second quarter results was 78 firms posting over 100 per cent growth in net profit. These firms recorded a whopping 213.43 per cent rise in net profit on the back of 48.92 per cent per cent rise in net sales.

Their operating margins have been higher at 25.97 per cent compared with 18.76 per cent in the corresponding previous quarter.

If the elite club is kept out of the sample, performance of the remaining 336 companies was modest with second quarter sales growth of 28.43 per cent and their net profit rising 21.54 per cent. The margins of these firms have been lower by 141 basis points quarter-on-quarter and 237 basis points year-on-year.

The 58 turnaround companies too chipped in with a collective net profit of Rs 616.73 crore against Rs 267.38 crore worth of net loss during the quarter ended September 2005. These firms have outperformed the corporate sector in terms of sales growth rate, by registering 39.2 per cent growth.

The average sales growth of 414 companies has been 31.41 per cent. Cement firms have done well in terms of growth in sales and profit though their operating margins have been lower than the June 2006 quarter.

The year-on-year operating margins were up at 31.51 per cent from 18.26 per cent recorded in September last year but were down sharply by 600 basis points compared with 37.52 per cent in the June 2006 quarter.

Commercial banks also followed the cement firms during the quarter with 19 private and public banks recording revenue growth of 28.19 per cent in the second quarter against 25.23 per cent in the first quarter.

The net profit of these banks has been higher by 51.71 per cent in the second quarter compared with 38.84 per cent growth in the first quarter.

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