Record profits, record revenues

The last financial year (2003-2004) was a record-breaking year for India Inc. Corporate India's top 1,000 companies (ranked on the basis of their consolidated net sales) raked in all-time high net sales of Rs 9,84,752 crore and a whopping Rs 72,468 crore in net profit during the year.

Year-on-year, net sales were up by over 16 per cent, while net profits shot up by 40 per cent. Profit margins too perked up during the year. Gross profit margins moved up from 12.79 per cent in 2002-2003 to 13.76 per cent in 2003-2004. Net profit margins increased from 6.07 per cent to 7.32 per cent.

The results look even better if the five public sector oil companies are excluded. Thanks to the government's reluctance to let oil companies charge market prices for their products, the public sector oil companies, which accounted for nearly 27 per cent of the net sales and over 30 per cent of the profits of the BS 1000 companies, showed an 11 per cent rise in sales and a marginal 6.2 per cent rise in profits.

Exclude them from the aggregate, and the BS 1000 companies show a 18.8 per growth in sales and a huge rise in net profits of 62 per cent. Profit margins, both gross and net, were up by almost 200 basis points each.

Indian Oil Corporation remained India's biggest company, with consolidated net sales of Rs 1,17,142 crore. IOC has three listed and four unlisted subsidiaries along with seven joint venture companies in its fold. Reliance Industries continued to be the largest private sector company with net sales of Rs 70,196 crore.

And while Reliance continues to be the biggest corporate in terms of total assets, ONGC, though showing a 9.1 per cent decline in net profit, continues to the most profitable company, with a net profit of Rs 9,488 crore.

Indian Oil ranked second, with a net profit of Rs 7,837 crore and Reliance was third, with a net profit of Rs 5,169 crore.

The excellent results were reflected in India Inc's power-packed stock market performance. Two consecutive years of bountiful profits ended a three-year bear market. Investors were finally rewarded, with the value of many of their investments more than doubling in 2003-2004, and increasing more than 25 per cent in the first nine months (April-December 2004) of 2004-2005.

Companies showered dividends on their shareholders "� dividend pay outs rose by 19.6 per cent. They distributed Rs 23,408 crore in 2003-2004, Rs 3,838 crore more than the 2002-2003 pay out of Rs 19,570 crore.

What's more, several companies did far better than the average "� 456 companies outperformed the 16.7 per cent average sales growth of the top 1,000 companies; 33 firms more than doubled their sales while sales of 73 companies increased by between 50 and 100 per cent.

Rajesh Exports, Mercator Lines, State Trading Corporation, Adani Exports and PSL were some of the stars of 2003-2004, all of them posting over a 100 per cent rise in net sales

On the other hand, 380 companies did relatively badly, with net sales of 210 firms rising by between a mere one and 10 per cent. One hundred and seventy did even worse, with an absolute decline in sales.

Corporate India's high sales growth led to buoyant net profits. As many as 424 of the BS 1,000 firms posted a net profit growth rate of over 41 per cent. Among these, 177 firms showed a net profit growth rate of over 100 per cent while 128 firms recorded a net profit growth rate of between 50 and 100 per cent.

The last financial year was also an ideal year for turning companies around "� as many as 69 of them converted their earlier losses into profits.

Steel Authority of India produced a spectacular turnaround, reporting a net profit for 2003-2004 of Rs 2,599 crore versus an aggregate net loss of Rs 6,034 crore in the previous five years. This massive makeover was possible on account of a huge upsurge in demand that led to higher price realisation. The reduction in borrowings and the lower interest regime also help SAIL show healthy results.

Jindal Vijaynagar Steel also turned around, with a net profit of Rs 528.68 crore, against a cumulative a net loss of Rs 660.58 crore.

A loan restructuring package helped Gujarat State Fertiliser Corporation (GSFC) turn around with a net profit of Rs 176.32 crore. GSFC was back in the black after reporting a net loss for three years.

Bharti Tele-Ventures proved that Indian cellular businesses can be profitable, in spite of India having the lowest tariffs in the world. Bharti earned a net profit of Rs 584.91 crore versus a loss of Rs 176.42 crore in the previous year.

Listed 500 versus unlisted 500

How did the top 500 listed private companies fare compared with the top 500 unlisted private companies in 2002-2003? Spiffingly, when it comes to profits. The listed 500 private companies reported a net profit growth rate of 38.2 per cent, much higher than the 19.42 per cent growth in net profit reported by the top 500 unlisted companies. 

When it comes to revenue, however, the story is slightly different. Unlisted private companies, a good number of them trading companies, reported a 20.87 per cent growth in revenue; listed private companies posted revenue growth of 13.6 per cent. 

The 500 listed private companies hugely overshadow the 500 unlisted private companies. The revenue of the 500 unlisted private companies (Rs 140,017 crore) is barely a fourth that of the 500 listed private companies (Rs 501,606 crore). 

What is more, their net profit of Rs 2,272 crore is just 8.7 per cent of the net profit of Rs 26,096 crore of the top 500 listed private companies. Operating largely in the areas of trading, consultancy services and so on, the 500 unlisted companies have a small assets base "� 26.2 per cent of the total assets of their listed 500 counterparts. They also borrow relatively much more money than listed companies.

  Last but not least, the low interest regime benefited the 500 big listed companies more than the 500 unlisted companies. While the interest cost of unlisted companies rose by 3.84 per cent, that of the 500 listed companies dropped by 7.3 per cent in 2002-2003.

A heartening feature of corporate performance in 2003-2004 was that the improvement was across the board.

Of the 70-odd sectors tracked by Business Standard, all but 16 reported a profit growth in 2003-2004. There was a major turnaround in industries such as fertilisers, ferro alloys, sugar and trading. Steel, tea, textile machinery, textiles, shipping, metals, automobiles (utility and commercial vehicles), cement, diamonds, hotels and paper manufacturing companies showed robust net profit growth.

However, telecom, home appliances, personal care, petrochemicals and oil companies suffered as margins were squeezed. The industries that grew in 2003-2004 were those that benefited from domestic as well as international demand. Chemicals, auto ancillaries, information technology, diamonds, hotels, shipping, metals, aluminium, steel and trading companies profited from the buoyant commodity cycle and international demand.

The automobiles, construction, hotels and steel industries posted an over 30 per cent growth in sales on growing consumer demand. Cement, tyre, sugar and tea companies enjoyed higher price realisation on lower production. But demand remained sluggish for fertilisers, fast moving consumer goods, personal care and domestic appliances.

Personal care firms faced price competition from their peers and had to cut the prices of their products to retain market share. The low interest rates in the last three years helped many companies show spectacular growth in sales and profits. Consumers also cashed in on the low interest rates, resulting in them rushing for housing loans, car loans and consumer durables. Nearly 70 per cent of the BS 1000 companies lowered their interest burden, with the overall interest burden declining by Rs 4,291 crore or 18.7 per cent.

The importance of low interest rates can be gauged from the fact that savings on account of lower interest costs accounted for nearly seven per cent of the total net profit of the BS 1000 companies. SAIL, Mangalore Refineries & Petrochemicals Ltd, Jindal Vijaynagar, Southern Petrochemical Industries Ltd (SPIC), Mukand, India Cement, Lloyds Steel and Indian Charge Crome benefited from debt swaps and corporate debt restructuring.

Hindustan Petroleum Corporation, Bharat Petroleum Corporation, Larsen & Toubro, Indian Oil and others substantially lowered their interest costs through swapping high cost loans. SAIL saved Rs 428 crore in interest cost, Jindal Vijaynagar Rs 137 crore, Indian Charge Crome Rs 268 crore and SPIC Rs 245 crore.

It wasn't just consumers who were doing the spending. After keeping a tight lid on capital investments between 1997-98 and 2001-02, corporate India finally began to loosen its purse strings in the last two years. Growing sales and profits and a substantial decline in the cost of borrowing led to a more conducive environment for fresh investments.

  The BS 1000 companies spent big sums on expanding capacities and on modernising and renovating existing capacities. The investment in fixed assets was across the board, led by the fast moving consumer goods, heavy engineering, automobile, metals, telecom, power, steel, cement, pharmaceuticals and textile industries.

  The BS 1000 companies increased their fixed assets by Rs 52,000 crore in 2003-2004, up 25 per cent over investments of Rs 41,400 crore in 2002-2003. Reliance Industries led the pack with an investment in fixed assets worth Rs 4,319 crore, followed by Gail India (Rs 2,692 crore); ONGC (Rs 2,099 crore); BPCL (Rs 1,616 crore) and G E Shipping (Rs 1,144 crore).

Tata Steel, Mahanagar Telephones Nigam Ltd, Hindustan Petroleum Corporation Ltd, Moser Baer, Videsh Sanchar Nigam Ltd (VSNL), Hindalco, Jaiprakash Associates, Shipping Corporation and Jindal Steel & Power made capital expenditure of Rs 500 crore each in 2003-2004.

This all-round increase in corporate health was reflected in the cut-off sales for being included in the BS 1000 companies increasing from Rs 62 crore in 2002-2003 to Rs 67 crore in 2003-2004. The number of companies in the $1 billion sales bracket moved up from 26 in 2002-2003 to 32, with Wipro, Bajaj Auto, Ruchi Soya, Ranbaxy Laboratories, Bharti Tele-Ventures, Infosys Technologies and State Trading Corporation joining this coveted list. Videocon International and VSNL lost their place in the $1 billion sales club because their net sales income declined.

The number of companies in the Rs 10,000 crore sales bracket increased by two to 11, with two Tata group companies "� Tata Motors (Rs 13,654 crore) and Tata Steel (Rs 11,129 crore) "� joining this exclusive club. The list of companies in the Rs 1,000 crore sales bracket expanded to 134 from 115.

Note that 10 years ago there were only 32 companies in the Rs 1,000 crore sales bracket list. It's not just sales that have been going up by leaps and bounds "� the number of companies with a net profit of over Rs 1,000 crore increased from 10 to 14 as SAIL, Infosys Technologies, Wipro and MTNL clambered aboard the Rs 1,000 crore net profit bandwagon.

Reliance Industries, with a net profit of Rs 5,169 crore, joined the $1 billion net profit group, which had so far consisted of only the two oil public sector undertakings, Indian Oil Corporation and ONGC.

That's not to say the news was all good for BS 1000 companies last year. There was movement in the opposite direction as well. Forty one firms posted net losses compared to net profit in the previous year; 127 companies continued to be in the red, though they pruned their net losses by Rs 85 crore to Rs 6,412 crore.

As many as 169 companies made a net loss of Rs 7,491 crore compared with 199 companies with a net loss of Rs 9,022 crore in the previous year. ITI, Oswal Chemicals, Tata Teleservices, Himachal Futuristics and BPL continued in the red.

Hindustan Lever posted a single digit growth in sales and profits, Tata Power and VSNL showed a decline in sales and profits and Dr Reddy's Laboratories had a sharp drop in profits.

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