Mumbai: Indian companies, which have reported earnings growth in the low single digits for the past six quarters, are unlikely to show much improvement as they start posting December-quarter financial results starting this week in the absence of an economic recovery.

“The quarterly results will be modest. We will see some recovery, but that will be very gradual," said Vaibhav Sanghavi, a director at Ambit Investment Advisors, a brokerage. “There are no big expectations from the numbers this time."

There might be some signs of recovery in certain sectors such as private banks, financial services firms and those that sell consumer goods, some analysts say, but most expect fuel retailers to report huge losses and software exporters to continue to languish.

Infosys Ltd, which announces earnings on 11 January, will be the first large company to detail its report card for the three months ended 31 December. Mid-size firms Gujarat NRE Coke Ltd and IndusInd Bank Ltd are scheduled to post quarterly earnings on 9 January.

Earnings growth of the 30 companies that constitute the BSE’s benchmark Sensex index is likely to be 11% from a year earlier, compared with 5.8% in the September quarter, according to brokerages Kotak Securities and Angel Broking.

“The outlook in terms of top-line and capital expenditure will be closely watched to see what is in store for the coming quarters and to gauge the confidence of companies in the recovery of our economy," said Ambit’s Sanghavi.

Ongoing trends of steady earnings and asset quality may continue for private banks and non-banking financial companies in the fiscal third quarter, according to Deutsche Bank. State-run banks are likely to show lower bad loans on a sequential basis, even while they remain high, it said.

Deutsche Bank expects wholesale borrowers such as Axis Bank Ltd, IndusInd Bank and Yes Bank Ltd to report a sequential increase in profit margins, with wholesale interest rates coming off, but sees the top lender State Bank of India to be the worst positioned on margins, as its funding costs will be slow to come down because it is largely retail funded.

Kotak Securities expects automobile companies to report good operating results, driven by reasonably stable demand in the festive season, normal inventory levels and a stable pricing environment. Commercial vehicle sales volume declined in the September quarter driven by depressed freight demand and low freight rates.

A likely softening of rates at the Reserve Bank of India’s quarterly monetary policy review on 29 January may also be a positive, making vehicle loans cheaper. The brokerage expects Mahindra and Mahindra Ltd and Maruti Suzuki India Ltd to outperform peers because of a richer product mix and strong revenue growth.

Brokerages expect most consumer goods companies to sustain their earnings growth on margin expansion and continuing demand. “The consumer-centric companies will continue to post good set of numbers backed by continuous demand," Sanghavi of Ambit said. Angel Broking expects ITC Ltd and Hindustan Unilever Ltd to post revenue growth of 15.1% and 12.6%, respectively.

Among media companies, revenue growth of publishers for the quarter would be driven by an uptick in advertisement sales because of the festive season.

Cinema hall operator PVR Ltd is expected to post a healthy revenue growth on the back of robust seat additions and many successful releases during the quarter, analysts said.

Pharmaceutical companies are likely to report robust results on the back of strong demand. Kotak Securities expects top generic companies to report strong sales growth of more than 15% from a year earlier boosted by a favourable currency movement, limited competition and new product launches for Dr Reddy’s Laboratories Ltd, Lupin Ltd and Sun Pharmaceutical Industries Ltd, and acquisitions in the case of Cadila Healthcare Ltd and Lupin.

Big software firms are likely to continue to report muted earnings growth, hurt by seasonality, Hurricane Sandy in the US, and slower-than-earlier-anticipated business momentum, despite a 40-50 basis points positive impact due to the rupee’s rise. A basis point is one-hundredth of a percentage point.

According to Nomura, information technology companies’ organic revenue is expected to rise 2.7% sequentially, slower than the 3.7% gain in the earlier quarter.

Nomura expects Infosys to cut its fiscal year 2013 organic revenue growth forecast to around 3.5% from 5% earlier, and retain its overall forecast at 5% growth.

Credit Suisse expects the seasonally strong December quarter to see improvement in average revenue per unit and minutes of use (Arpu, MOU) for Indian telcos—with 2-4% quarter-on-quarter (Q-o-Q) revenue growth, despite the negative impact of new subscriber acquisition rules.

“We expect 2-4% Q-o-Q revenue growth in the top-line for operators, despite a fall in subscribers due to new subscriber acquisition rules. We note that at 2% QoQ revenue growth for Bharti, our expectations are conservative compared to last year’s 4% performance," Credit Suisse said in a note.

There would be a sharp increase in Arpu and MOU for Reliance Communications Ltd on account of the recent deactivation of inactive subscribers, it said.

Most brokerages expect the December quarter to be lacklustre for the metals and mining sector. “In the ferrous space, the top-line growth driven by volumes will fail to translate into margins, as continued weakness in domestic prices along with a weak rupee offset the softness in raw material prices," ICICI Securities said in a note.

Energy firm Reliance Industries Ltd is likely to report a Q-o-Q decline in net profit, as lower refining margins and weaker gas volume offset gains from the petrochemical business.

Fuel retailers are expected to report huge losses given large under-recoveries and forex-related losses because of the rupee’s depreciation. Rise in international crude oil prices coupled with rupee depreciation resulted in higher under-recoveries for them on account of selling diesel, kerosene and cooking gas at subsidized rates.

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