It is not just Infosys, but there are many companies which have surprised the Street by posting better than expected results for the quarter ending December 2012. Of the 166 companies that have posted results so far, positive surprises have come from companies in the IT, banking, Oil & Gas and consumer space (Infosys, HCL Technologies, Reliance Industries, Yes Bank and Bajaj Auto are among key ones). Interestingly, the aggregate numbers suggests an improvement in the operational performance of these companies.
On an 18.5 per cent growth in aggregate revenue, the aggregate profit before interest, depreciation and tax (PBIDT) of the 166 companies has jumped by 25.1 per cent compared to the year ago quarter. This is even as other income (largely comprises of non-core income) has risen by just 5 per cent. Even if one excludes Essar Oil which reported a net profit of Rs 32 crore against a loss of Rs 3,986 crore in the year ago quarter, aggregate revenue, PBIDT and net profit are up by 14 per cent, 15 per cent and 16.6 per cent respectively, on a year-on-year basis.
The breadth of results too is impressive. Almost 80 per cent of the companies have reported growth in profits with six companies reporting a turnaround. Among prominent companies, Sintex, NIIT Tech, Mahindra Life and Hero MotoCorp saw their profits fall by over 10 per cent on a year-on-year basis, while NIIT and JP Power Ventures slipped into the red.
The numbers suggests that companies have been able to control their cost and as a result of which their operating profit growth has been ahead of sales growth. Analysts attribute this to lower commodity prices, cost cutting and stable employee costs. With interest costs under control, the net profit at the aggregate level has got some boost.
Though the list is still small (these 166 companies account for about 25 per cent of the total market capitalisation) to conclude any trend, sectorally the IT sector has done well. On an average, nine IT companies have notched 17.3 per cent growth in revenue with strong 42 per cent jump in net profit. A pickup in discretionary spends was the key growth driver for these companies. Most companies saw a sequential rise in realisations, which aided revenue growth.
Banks and financials, too, have performed well in terms of expectations, particularly the private sector banks. There are about 14 banks and financial institutions which have declared results so far; majority reported double-digit growth in net income. The growth in net profit has been strong at 38 per cent wherein NBFCs clocked 71 per cent. "I think the NBFCs have done well because earlier there were lot of restriction on the credit and the liquidity was low, which was not the case in the December quarter. Private sector banks have done well, but that was in line with the expectations. The real picture will emerge once the PSUs come out with the results," says Sonam Udasi Head of Research, IDBI Capital.
In Oil & Gas space, both Reliance Industries and Essar Oil did well, with the former beating the Street estimates by a wide gap. Its GDRs jumped over 5 per cent post results on Friday evening. Companies like ITC, Den Network, Oberoi Realty, Hindustan Zinc and TTK Prestige reported over 20 per cent rise in profits. In the auto space, Bajaj Auto results did not excite while Hero’s was disappointing and far below estimates.
While the start has been good, analysts believe that next few weeks will be crucial before concluding any trend since many companies are yet to announce their December quarter results. A majority of companies from the power, capital goods, infra and metal space, which are among sectors that are expected to report subdued performance, are yet to declare their results which could prove to be a drag on aggregate numbers.
