 "Early birds keep their heads above water")
If early birds are an indication, corporate India's results for the quarter ended Septe-mber this year might not disappoint the Street. For the 156 companies that have announced their results so far, the net profit rose 3.9 per cent year-on-year, despite a 9.5 per cent fall in net sales.
For these companies, the growth in net profit comes after a 0.4 per cent rise in the June quarter and a 0.8 per cent decline in the quarter ended March this year.
If one excludes Cairn India and JSW Steel, the remaining 154 firms posting 11 per cent growth in net profit. Together, Cairn India and JSW Steel posted a steep 73 per cent decline in aggregate net profit.
If the financial sector is excluded from the overall sample, the 101 remaining firms posted mere single-digit growth in net profit, owing to a dismal performance by steel companies. Five steel companies posted an 82 per cent decline in aggregate net profit at Rs 144 crore; these firms had posted a net profit of Rs 800 crore for the year-ago quarter.
Lower commodity prices and finance costs helped India Inc report healthy profit growth. For manufacturing firms, the aggregate raw material cost fell 16 per cent, while borrowing expenses were down two per cent.
Operating income or earnings before interest, tax, depreciation and amortisation margins improved by 15 basis points to 24.49 per cent from 24.34 per cent in the year-ago period, primarily due to lower raw material prices. "Margin expansion in sectors such as auto is due to a decline in metal prices; it might not last unless matched by volume growth," said G Chokkalingam, founder and chief executive of Equinomics Research & Advisory.
Of the eight Sensex companies that have announced their results, five - Bajaj Auto, Hero MotoCorp, Infosys, Reliance Industries and HDFC Bank - either met or beat the average forecast of analysts. The rest - Hindustan Unilever, TCS and Wipro - lagged analysts' estimates. These eight Sensex companies recorded an average 11.5 per cent year-on-year growth in net profit, against the average analyst estimate of 7.4 per cent.
Analysts expect India Inc to report a decline in both top line and bottom line for the September quarter. The results declared so far haven't been in line with analysts' expectations. "Except a few companies such as Reliance Industries, which surprised on the positive side, most results were below par and showed the tough operating environment. Manufacturing companies gained from lower commodity prices but there was little or no volume growth," said Nitin Jain, head (capital markets), Edelweiss Capital Markets.
"In the information technology (IT) sector, too, the results were company-specific, with Infosys and Wipro reporting good numbers but issuing a muted guidance, while TCS and HCL Tech reported below-par numbers but gave an optimistic forecast," he added.
Of the sample size, 80 firms reported growth in profits. Among the prominent firms, NIIT Tech, Himatsingka Seide, Bajaj Finance, Zensar Technologies and IndusInd Bank saw their profits rise about 30 per cent year-on-year, while Cairn India, JSW Steel, Tata Sponge Iron, ACC and Gati posted a fall of 30 per cent in net profit.
The IT, banking and financials, pharmaceuticals, textiles, logistics and entertainment sectors recorded double-digit growth in profit. The steel, cement and agro chemicals sectors, however, recorded a decline in profit.
The 10 pharma firms that have declared their results so far recorded 24 per cent growth in net profit, while the banking and IT sectors recorded 20 per cent and 11 per cent growth in net profit, respectively. The aggregate net profit of the three cement companies that have announced their results has declined 12 per cent year-on-year due to lower realisations.
Some analysts say the list isn't large enough to establish a reliable trend (the 156 companies account for about seven per cent of the overall market capitalisation).
According to Motilal Oswal Resea-rch, companies in cyclical sectors such as metals and energy will continue to report a fall in net profit. Consumer, technology, utilities, overall financials (excluding public sector undertakings) and banks would report the highest net profits, while metal firms would report the lowest.
Chokkalingam says the only saving grace would be the fact that India Inc could end the September quarter with either flat or low single-digit growth in net profit, against fear of a profit decline.
