The general picture for profitability of the corporate sector in the second quarter ended September has been boosted by the extraordinary profits made by a handful of companies.
Of 2,050 companies surveyed (excluding those in oil, finance and trading sectors), the reported net profit growth was 9.33 per cent, compared to 4.3 per cent in the first quarter.
However, this surge in performance was mainly due to 83 companies, which posted 131 per cent growth in net profit. If one excludes these 83 from the sample, net profit growth rate slowed to just 3.5 per cent.
Extraordinary profits for these 83 companies came from gain of foreign exchange fluctuations, sale of certified emission reductions, insurance claims, profit on sales of immovable property, debit balance written off, octroi refund, reversal of commission paid to the chairman or managing director, sale of stake in associate companies or profit on sale of investment. Such extraordinary profit, though only 5 per cent of net profit of all 2,050 companies, accounted for 45 per cent of the net profit of 83 companies.
Engineering, construction and cement major Jaiprakash Associates reported net profit of Rs 870.2 crore from extraordinary gain of Rs 941.8 crore garnered by sale of 50 million treasury shares held in a beneficiary trust. Otherwise, the company reported poor performance, with operating profit from core operations rising 20 per cent to Rs 346 crore. The operating margins of the company fell by 520 basis points due to higher direct construction, manufacturing and power cost.
Tata Tea reported net profit of Rs 258 crore in the second quarter (Rs 43 crore), thanks to extraordinary income of Rs 186 crore on sale of shares held in Rallis India. Emco reported net profit of Rs 108 crore, of which Rs 98.5 crore came from sale of a subsidiary which was setting up a power plant at Warora, Maharashtra. Lloyds Steel would have made a net loss of Rs 34 crore but reported a net profit of Rs 50 crore, thanks to Rs 83.5 crore receivables on account of debit balances written off during the quarter.
| OUT OF THE ORDINARY | ||||
| (In Rs cr) | Quarter ended Sep ‘08 | Quarter ended Sep ‘09 | ||
| Net profit | EO* | Net profit | EO* | |
| JP Associates | 203.37 | 2.54 | 870.19 | 941.76 |
| Tata Tea | 43.79 | 2.06 | 258.04 | 210.38 |
| EMCO | 11 | 0 | 107.87 | 98.5 |
| Lloyd Steel Inds | -2.81 | 8.79 | 49.63 | 83.64 |
| Gwalior Chem | 7.03 | 0 | 76.48 | 79.4 |
| Hind Motors | -16.21 | 0 | 27.42 | 55.45 |
| Varun Shipping | 44.27 | 0 | 13.05 | 49.07 |
| Chowgule Steam | 10.03 | -6.15 | 40.63 | 42.36 |
| Morepen Labs. | -15.66 | 0 | 26.23 | 33.86 |
| Godrej Ind | -9.09 | 0 | 36.43 | 27.1 |
| *EO=extraordinary income | ||||
Adani Enterprises added Rs 15 crore in its second quarter net profit of Rs 148 crore, as the chairman and the managing director of the company reversed the commission of Rs 15 crore (Rs 7.50 crore each) they had received in the salary package for the year 2008-09. Aditya Birla Nuvo added Rs 8.6 crore to net profit through share of surplus on prepayment of loan by Idea Cellular. Larsen & Toubro benefited from sale of stake worth in 67.6 crore in associated companies, while Mahindra & Mahindra got Rs 47.9 crore as octroi refund and Rs 91 crore from sale of investment.