Bottomline and topline growth of private sector old economy companies dipped 0.1 per cent each during the second quarter ended September 2001.
According to a sample of 500 companies, the aggregate drop in net profit of information technology, communication and entertainment (ICE) company stocks has been steeper at 4.1 per cent backed by a 4.1 per cent rise in sales.
While a global picture shows that as many as 27 sectors managed double-digit sales growth, while 34 sectors ended the quarter with single digit growth. Around 66 sectors reported drop in sales income.
The scenario was more or less same for bottomline figures. Poor demand has been reflected in low price realisation and a corresponding dent in corporate net profit. As many as 7 sectors scored single digit bottomline growth, while 43 sectors had a double-digit growth between 10 per cent and 900 per cent.
Of these, pharmaceutical and two-wheeler companies were the clear winners in terms of sales during the quarter, while petrochemicals and telephone cable firms turned to be major losers.
Global recession has already taken a toll on exports, which are down 3.6 per cent during the quarter. Industry experts feel that the trend will continue in the second half of the fiscal also.
The same mood is also reflected in the results of the latest Business Expectations Survey conducted by the National Council for Applied Economic Research (NCAER). From a high of 122 points in April 2000, the NCAER's Business Confidence Index (BCI) has fallen to a 24-month low of 82.5. While the weighted BCI, where each sector is weighted in accordance with its share in overall industrial output, is down sharply and is now to its lowest level in the last 60 months.
The decline is across all sectors and regions with very few exemptions. Yet, there still remains a ray of hope for an early rebound looking at the major sectors of the economy -- cement, two-wheelers and pharmaceuticals.
While exports (especially that of generics) continued to drive the growth of Indian pharmaceutical companies, multinational pharmaceutical companies have also shown signs of recuperating from the ill health of the last few quarters. Private sector pharmaceutical firms managed a sales growth of 24 per cent and ended the quarter with a net profit growth of 22 per cent. Two-wheeler companies, unlike their sector counterparts, are riding on a 14 per cent increase in sales and a 90 per cent jump in net profit.
Four-wheeler firms ended the quarter with a one per cent drop in sales and a net a loss of Rs 25.9 crore. The only comfort was the net loss has dropped from Rs 136 crore reported in the same quarter previous year.
This has been achieved by a booster from medium and heavy commercial vehicle sales which have increased by 3.6 per cent during the first half of the fiscal.
Cement companies were driven by better realisation and higher despatches than the first quarter of the fiscal. The net profit growth was at 48 per cent and despatches were up 6.9 per cent (3.7 per cent).
In textiles, only readymade apparel firms have been able to put on a better show then its sector counterparts. Private sector readymade apparel manufacturers saw a sales growth of 39 per cent against a 11 per cent drop reported by the textile sector.
The engineering sector has reported a sales income drop of 22 per cent with a net profit decline of 17 per cent. The steel sector witnessed a major erosion in flat products consumption. A 8 per cent drop in cold rolled consumption for the first half of the fiscal indicates a major trouble with the manufacturing sector. A lackluster export markets and continued slowdown in domestic market resulted in a 3.3 per cent slip in the sector's sales income. This saw its net losses increasing from Rs 12 crore to a whopping Rs 477 crore.
Petrochemical firms reported a hefty drop of 23 per cent in sales. This has been largely skewed with the pathetic show of the sector major -- Reliance Industries. However, cost efficiency has seen the sector end with a net profit growth of 4.13 per cent.
Another concern is that the pick up in rural demand might be moderated by weak urban demand on the back of massive voluntary retirement schemes, poor stock market and falling interest rates.
The lack of support from rural market saw the fast moving consumer goods (FMCG) sector registering a consequent single digit growth in sales. FMCG firms managed a 1.5 per cent increase in sales.
However, stringent cost control and efficient management of operating expenses saw the quarter to end with a net profit growth of 6 per cent. Domestic appliances firms are no exception. Cigarette firms also saw witnessed a mere 5.8 sales growth.
Aluminium makers, which had been witnessing a single-digit growth continuously for the last two quarters, saw their aggregate net profit increasing by a small 0.1 per cent.
Information technology companies saw a sales income growth of 8.5 per cent against a whopping 47 per cent in the same quarter of the previous year. Sales at telecommunication companies dipped 22.1 per cent. This was against 111 per cent managed during the same quarter of the previous year.
The only positive signal from the global slowdown is that oil prices will remain depressed (provided the ongoing war on terrorism does not engulf the oil producing countries).
However, this also would only mean that oil prices will not rise in India, but they will not fall either as India has already amassed a large oil pool deficit due to administered pricing mechanism.
Reliance Petroleum, a sole sector representative from the private sector, bucked the trend. The company managed to score a 1.7 per cent increase in sales and a 2.23 per cent rise in net profit.
The company is considered for the study as its last eight quarter performance is not available.
