The overall corporate performance in July-September 2015 has been disappointing. Some sectors have shown signs of a turnaround but there are major concerns as well. A sample of 1,600 companies that have declared results have seen sales fall 4.8 per cent. Net profits adjusted for extraordinary items are down two per cent. True, retail inflation has remained moderate, at about five per cent, in this period. But there is a base effect since global crude prices were high until September 2014 and inflation was much higher. A fall of 22.9 per cent on the cost of raw material and 9.9 per cent on purchased goods can be explained thus. However, interest costs rose by 5.7 per cent overall in spite of cuts in rates, implying problems in the credit cycle.
Lower crude oil prices have meant a 30 per cent year-on-year rise in net profits for the refinery and marketing sector; crude oil producers have seen a 27 per cent fall in their profits and a 4.5 per cent fall in sales. These trends will moderate as base effects wear off. Power generation has done well. Net profits are up 44 per cent and sales realisations up 14 per cent. NTPC has seen net profits expand by 39.9 per cent while Tata Power and Adani Power have moved from losses to profits. Elsewhere, the news is either poor or mixed. In finance, Bajaj Finserve and LIC Housing Finance have done well while HDFC has remained flat. Banks have seen absolutely flat profits when aggregated. Credit offtake has risen just 6.9 per cent. Some state-owned banks, such as Bank of Baroda, Canara Bank, Bank of India and Indian Overseas Bank have released notably poor results. Cement has seen shrinking profits, down 33 per cent, and sales too have declined seven per cent. A sample of 67 iron and steel companies has seen a 19 per cent drop in sales and net losses of Rs 106.7 crore versus profits of Rs 1,586.27 crore in the corresponding quarter of 2014-15. The non-ferrous metals industry is also in trouble with flat sales and a 13.6 per cent drop in net profits.
The inter-related sectors of construction, realty and infrastructure development have all seen lower profits and flat sales. Telecom service providers have recorded a sharp rise in interest costs (up 35 per cent) with flat sales and lower profits. Capital goods have continued to struggle. BHEL has seen a big loss, as have Crompton and BEML. In the automobiles industry, Maruti has done well. So have Ashok Leyland and Eicher Motors, but Tata Motors has seen losses. Companies in the fast-moving consumer goods sector, linked to rural demand, have seen a seven per cent rise in net profit and a four per cent rise in sales. Nestle is the outlier, with a 32 per cent dip in sales and a 54 per cent dip in profits due to the Maggi imbroglio.
The key exporters - information technology (IT) and pharma - are both more or less flat with very mixed results. The "big five" of TCS, Infosys, HCL Tech, Wipro and Tech Mahindra contribute about 80 per cent of IT sales, and they have logged rupee-denominated sales gains of 14 per cent and a rise in rupee-denominated profits of 10 per cent. In pharma, 82 companies reported a rise in total sales of seven per cent and nine per cent in net profits. Sun Pharma and Lupin disappointed while Torrent Pharma and Piramal Enterprises delivered pleasant surprises. Another key export sector, gems and jewellery, has recorded a 35 per cent fall in net profits. Overall, weak demand continues to plague India Inc. However, till the commodity bust stops impacting the base of comparison, it will be unclear what the real effect is.
