Mumbai: Even as analysts and experts predicted a poor earnings season, the first lot of companies that have thus far declared results for the April-June quarter, the first of 2008-09 for most Indian companies, have belied such fears, growing their aggregate revenue at the highest rate in eight quarters.
That could mean either slowdown fears have been exaggerated or the worst is still to come, and the prevailing opinion among analysts is veering towards the latter.
A Mint analysis of the April-June quarter earnings of 151 companies shows their revenue expanding at 33.68% on year-on-year (YoY) basis. Even the growth in net profit at 7.59% is better than the 4.35% growth in net profit in the March quarter.
See: On track (graphics)
To be sure, the sample size is small and many large firms are yet to announce their earnings for the June quarter. Already, however, some analysts have started saying that there could be a positive surprise in revenue growth for the first quarter of the fiscal year that began on 1 April, though earnings growth may not be spectacular.
Still, the momentum may not last and analysts are bearish on the outlook for coming quarters. “The profit growth rate will take a hit, more in the later half of this year,” said V. Ramesh, CEO of Mumbai brokerage Prabhudas Lilladher Financial Services Pvt. Ltd.
Another Mumbai-based brokerage, First Global Securities Ltd, in a equity research report released on 17 July, estimated that “India’s aggregate earnings growth, during the current financial year, will be in single digit.” As a result, overall stock valuations would continue to fall, the report said.
Sensex, the 30-share benchmark index of the Bombay Stock Exchange, has lost close to 14% in the April-June quarter. Since the beginning of the year, the index has lost about a third in value. It could have been even more but for the gain of 1,059.6 points or 8.43% in two days last week.
So far, seven Sensex firms have announced their results for the April-June quarter. Besides the four software services companies—Infosys Technologies Ltd, Tata Consultancy Services Ltd, or TCS, Wipro Ltd and Satyam Computer Services Ltd—these include one pharmaceutical firm (Cipla Ltd), one infrastructure firm (Jaiprakash Associates Ltd) and one mortgage firm (Housing Development and Finance Corp. Ltd). Collectively, their net sales grew by 29.19% and net profit by 14.8%—both higher than the March quarter when their net sales had grown by 27.81% and net profit by 8.81%.
The set of 151 companies, which announced quarterly results, includes eight banks, 13 auto ancillary companies, 12 IT firms, and 13 textile firms. Among the IT firms, Satyam Computer saw the highest YoY growth in both sales (43.65%) as well as profits (48%). Sector bellwether Infosys grew its sales by 27.18% and net profit by 22.76%, better than rivals TCS and Wipro.
Adjusted net profit of the set of 151 firms, excluding extra-ordinary items, for the June quarter, has picked pace compared with growth during the March quarter. It has risen from 6.68% to 11.56%. Yet, it is far below than what these companies had recorded in the past six quarters.