 "Slow investment demand hits March quarter results")
The scorecard varies greatly across sectors, even among companies in the same industry. The only silver lining, though, is that non-discretionary consumer spending has shown some resilience, despite a rise in rural distress. Fast-moving consumer goods majors Hindustan Unilever, Dabur India and Marico have reported better numbers, aided by a decline in input costs.
But analysts are keeping their fingers crossed. "Demand slowdown is visible across the board and the recent uptick in margins and profitability from lower commodity prices will not sustain for long, unless there is a secular demand growth" says Dhananjay Sinha, head of institutional equity at Emkay Global Financial Services.
Overall, the combined net sales of 443 companies across sectors was down 2.9 per cent on a year-on-year basis, while their net profit (adjusted for exceptional items) declined 0.6 per cent in the March 2015 quarter. Excluding financial, information technology and oil & gas companies, net sales in the fourth quarter were up 4.7 per cent, while net profit rose 5.8 per cent. The trend, however, might change as many large companies in sectors like capital goods, construction, power, metals & mining and public-sector banks are yet to declare their results.
IT exporters, a major earnings driver for India Inc in 2013 and 2014, were laggards during the quarter; they have reported their worst numbers in the past two quarters. IT majors like Tata Consultancy Services, Infosys, HCL Tech and Wipro reported 8.6 per cent annual growth in net sales and a tepid 9.8 per cent rise in net profit (adjusted for exceptional items). "This is the first time all major IT companies have reported below-par numbers. This was the biggest setback during the quarter, given their large weight on benchmark equity indices," says Devang Mehta, senior vice-president and head of equity sales & advisory, Anand Rathi Financial Services.
Cement makers Ultratech Cement, ACC and Ambuja Cement were exceptions, as poor demand growth and a rise in capex cost (interest liability and depreciation allowance) led to a sharp 28.7 per cent annual fall in their combined net profit. Companies blamed it on a slowdown in new house construction, as families, especially in rural areas, deferred home construction due to crop losses and low consumer confidence.
"Rural housing, a big demand driver for the industry, and construction activity slowed down due to factors like crop losses from unseasonal rains and low consumer confidence," says O P Puranmalka, managing director, Ultratech Cement, the country's biggest cement company.
Automakers, led by Maruti Suzuki and Eicher Motors (makers of high Royal Enfield motorcycles), also reported good numbers. In contrast, India's top two-wheeler maker, Hero MotoCorp, disappointed with low single-digit growth in revenues and contraction in profits, due to a combination of poor offtake and a rise in sales & distribution costs. Analysts attribute this to a better demand environment in urban areas than rural and semi-urban areas.
"Passenger cars and high-end motorcycles are largely bought by the urban middle class, which has seen some gains from a decline in fuel and commodity prices. But income in rural areas is down due to crop losses and a cut-down in government spending on welfare schemes. These have affected demand for regular motorcycles and a demand push by manufacturers," says Sinha.
Others say there will always be winners and laggards among companies and the gap between the two will widen further, unless there is a secular earning growth driven by capex and investment cycle. "Corporate performance has been polarised for over three years now. Every few quarters, we see a change in the list of winner and loser sectors and companies. This will end only when there will be secular earnings growth," says Mehta. Till such time, it will remain a stock pickers' market, with relatively good-performing companies sucking in capital from laggards, even if their valuations look insane.