The party continues

Corporate India is in great shape, or so the Business Standard Research Bureau's study on the performance of early bird results indicates. Net sales have grown 23.39 per cent in the March 2006 quarter, compared with the corresponding period a year earlier. Growth in profits has been even more impressive, with operating profits rising almost 36 per cent, while net profits have gone up 40.9 per cent. Going by these numbers, the economy is likely to see another blockbuster performance by India's companies. If the Sensex has reached new highs, it should be no surprise.

Some caution is usually needed at this stage of the results season. The early bird results are usually from companies that have done well. Companies declaring results early also win brownie points from investors, as it shows that reporting systems are in order. So the overall numbers will dip as more results come in. Nevertheless, a comparison of 138 companies out of the latest sample, which have been around for the past three years, indicates that the performance is good when compared with past periods. Net sales have grown faster than in past periods, whereas there is some slowing down in growth of net profit when compared to the December quarter.

In terms of net sales growth, sugar manufacturer Bajaj Hindusthan has posted near 400 per cent growth on the back of higher sugar prices and new capacities kicking in. Rising metal prices have seen Hindustan Copper nearly triple sales. Software companies have done well due to the addition of new clients and more outsourcing by existing clients. Tech companies like TCS, Infosys, Wipro and Satyam have posted 30 per cent plus top line growth, with HCL Technologies and Mphasis BFL recording 99 per cent and 79 per cent growth, respectively. Varun Shipping is up 72 per cent due to capacity additions, though freight rates have dropped. With the strong capex cycle, engineering companies too have done well with Kirloskar Oil Engines, Bharat Electronics and Greaves Cotton reporting improved top line. And the construction boom has seen cement companies ACC and Gujarat Ambuja post 42 per cent and 109 per cent growth in net profits, respectively. These are numbers straight out of investor dreams.

On the other hand, pharma companies like Ranbaxy, Biocon and Fulford show mixed signals, while Reliance Energy's sales have declined. Auto ancillaries too have shown mixed signals, as Sundaram Clayton and FAG Bearings did well, while Sona Koyo and Automotive Axles have posted a decline in net profits. The only steel company to have come out with its results, JSW Steel, was affected by lower steel prices during the March quarter.

These sectoral and individual performances suggest that the scene has been set for good overall performance in the March quarter. The trend indicates that sectors like cement, engineering, technology, non-ferrous metals and sugar will do well, while the performance of steel, auto ancillaries and pharmaceuticals is likely to be mixed. How some other key industries like banking, automobiles, FMCG, textiles and telecom perform will be watched closely. And, of course, oil companies, which account for a large chunk of Corporate India's sales, will make a big impact on overall performance. What all this does is dispel the fear that the new round of quarterly results would demonstrate a slowdown. On current reckoning, especially with surveys showing that business confidence has continued to soar, the party will continue for a while yet.