New Delhi: India Inc is back to profitable ways, with every three out of four blue-chip companies reporting a surge in bottom line for the June quarter.
Analysis of the net profit of the top 30 Sensex firms in the April-June quarter shows that their bottom line rose, on average, 36% over the year-ago period, after three quarters of weak earnings.
The global economic gloom notwithstanding, the Bombay Stock Exchange Sensex firms together saw their top line climb an average of 8% in the June quarter.
“Earnings for corporate India remain meaningfully ahead well into the current reporting season ... average earnings growth is mid-teens, and a good 5-10% ahead of our expectations, across various aggregates,” Citigroup said in its India Equity Strategy report.
Companies that have reported a significant surge in June quarter profit include Jaiprakash Associates (292%), Mahindra & Mahindra (152%), Tata Power (144%), Hero Honda (83%), and cement firm ACC Ltd (79%).
Analysts say that even as the margins of the companies are improving, sales are poor as there is slack in demand.
“Businesses have clearly taken advantage of raw material costs (50% of expenses), but also appear to have cut other operating costs, collectively driving up margins 211 basis points YoY. We believe rising margin is good, but rising demand or sales would probably be better,“ the report added.
The country’s largest bank, SBI, posted 42% growth in net profit, backed by a healthy rise in treasury, wholesale and retail banking operations.
Commenting on the SBI results, the Citigroup research note said, “SBI needs (more than others) growth and slightly higher rates; to leverage its bullish positioning, and also ease current strains.”
Besides, Tata Motors reported 58% growth in profit.
The eight laggards among the 30 Sensex companies are heavyweight Reliance Industries (12%), DLF Ltd (86%), Sun Pharma (57%), Tata Steel (down 47%), Sterlite Industries (42%), ONGC (27%), Hindalco (31%) and Hindustan Unilever (2.7%).
“Sales expectations are more in line with actual results and reflect a weak demand scenario ... earnings are ahead and reflect a healthy margin scenario,” the report said.
At a broader level, 178 out of BSE 500 companies have reported 17% YoY growth in profit. However, analysts feel with there being many surprises in earnings figures, the situation suggests volatility and modest predictability.
Meanwhile, sectoral performance at the broader level was more or less in line with anticipations, although street expectations have not necessarily been high.
“The sector leaders have been banks, IT services, and telecom. Materials and consumer and capital goods have been in line with diversified financials the laggards,” Citigroup noted.