Mumbai: Growth in sales and net profit of Indian companies in the March quarter rose at the slowest and the second slowest pace in 10 quarters, respectively, because of weak demand and higher costs.
Companies that are still to announce quarterly earnings are likely to report a similar weak trend, analysts say.
Sales grew 10.8% from a year ago as subdued economic activity resulted in poor demand for products and services, according to a Mint analysis of the average earnings of 115 companies that have declared earnings till date, and for which data is available for the past 10 quarters.
Net profit rose 13.9% in the same period as year-end tax outgo and employee costs crimped earnings.
“We never expected earnings to be good, to begin with. So the overall report cards are on expected lines. It will take at least two-three quarters for things to turn better, depending on how soon the macro situation in the country improves,” said Deven Choksey, managing director and chief executive of Kisan Ratilal Choksey Shares and Securities Pvt. Ltd.
Banks and oil and gas companies were excluded from the analysis as their earnings components and structure are different from that of the companies selected.
The companies covered by the Mint analysis, collectively incurred Rs.18,072.49 crore in terms of employee expenses, and paid Rs.3,827.77 crore in taxes, both the numbers being the highest in 10 quarters in absolute terms.
Raw material costs, too, were the highest at Rs.18,362.69 crore in the same period.
Asia’s third largest economy is grappling with a record current account deficit, high inflation, political uncertainty and pessimism over the pace of reforms.
“Investments haven’t picked up and the order pipeline was weak in the March quarter,” said Dipen Shah, head of private client group research at Kotak Securities Pvt. Ltd.
March-quarter earnings of the companies analysed till date revealed a mixed bag.
Weaker-than-expected forecasts and earnings reported by Infosys Ltd and Wipro Ltd, for instance, disappointed investors.
Infosys’s revenue growth for the March quarter fell short of expectations and its forecast for fiscal 2013 was below the industry average, sending the company’s shares lower by more than 21%.
Wipro’s forecast also disappointed investors.
Idea Cellular Ltd beat quarterly revenue and profit estimates by analysts.
Its consolidated revenue grew 8.65% sequentially to Rs.6,061.4 crore on the back of an 8.46% jump in voice traffic.
The country’s largest car maker, Maruti Suzuki India Ltd, posted an 80% increase in profit on higher sales of new models.
“It is all a play of expectations. Expectations were high for IT and investors were disappointed with what came out. For Idea and Maruti, expectations were low—but they reported a strong set of numbers,” said Sandip Sabharwal, chief executive officer of portfolio management services at brokerage Prabhudas Lilladher Pvt. Ltd.
Private sector banks posted robust earnings, helped by higher net interest income.
Top private lender ICICI Bank Ltd’s stand-alone net profit rose 21% in the fourth quarter, in line with expectations, boosted by an increase in net interest income.
Axis Bank Ltd’s profit for the March quarter increased 22% to Rs.1,555 crore as loan demand from individuals rose even as the lender earned more revenue through fees and trading.
“Banks have come out with a good set of numbers. Asset quality is in check. However, we have seen only private banks coming out with numbers so far. The complete picture will be clear only when we see PSU (public sector undertaking) banks detail their earnings,” said Sabharwal.
The real estate sector, however, failed to enthuse investors.
Oberoi Realty Ltd, India’s second largest developer by market value, posted a net profit of Rs.145.17 crore, up 1.1% compared with the year-ago period, for the March-ended quarter, while Mumbai-based Indiabulls Real Estate Ltd reported a 7.2% decline in quarterly net profit from a year ago.
Reliance Industries Ltd posted a 6% year-on-year rise in stand-alone net profit in fiscal 2013, boosted by robust refining margins.
“I think the overall results this quarter (January-March, 2013) are going to be subdued and the companies which are yet to report earnings are likely to continue the weak trend we have seen so far. Growth rates are going to be low,” said Dipen Shah of Kotak Securities.