Analysis of cos that have published their Q4 results so far offers little solace, as the trend of slowing growth rate in profits continues
WE ARE still just half-way through the results season, even though the March ’08 quarter ended long ago. A fair number of companies (though not all) have already published their quarterly numbers. Hence, we at ETIG, thought it necessary to take a quick look at India Inc’s performance so far. While this is just an interim review of Corporate India’s performance, we will carry out a detailed analysis in due course, once all the results are announced. The analysis of 1,156 companies that have published their fourth-quarter results so far offers little solace, as the trend of slowing growth rate in profits — which had been haunting Corporate India since the past six quarters — is still visible.
During the March ’08 quarter, India Inc’s aggregate sales rose by 21.5% yearon-year. But operating profit took a hit due to higher raw material costs. Annual growth in operating profit at the aggregate level was just 14.3%, in line with the slowdown witnessed in previous quarters. Further, operating margin weakened to a two-year low of 17.1%.
Corporate India’s other income witnessed a slower growth as companies incurred foreign exchange (forex) losses due to weakening of the rupee against the US dollar during the quarter. As interest and depreciation costs rose moderately over previous year figures, the before-tax profits registered just 15% growth — the lowest in the past 12 quarters.
However, the provision for taxes remained flat compared to year-ago levels. A spurt in tax provisions by companies such as HDFC and Infosys Technologies during the March ’08 quarter was neutralised by substantially lower tax provisions by Mangalore Refinery and Petrochemicals (MRPL), Bharti Airtel, Maruti Suzuki and IFCI. Hindalco Industries, which amalgamated its subsidiary, Indian Aluminium, with itself during the quarter, reported substantial write-back of tax provisions which were made in the previous quarter. However, the stagnant tax burden offered little help to companies’ aggregate bottomline, which grew by 17.1% — again the lowest growth rate in the past two years. During the preceding few quarters, the growth in bottomline was higher on account of rising other income, rather than operating performance. This trend was discontinued during the March ’08 quarter. Excluding other income, the growth in net profit was 7.5% — better than just 5% witnessed in the December ’07 quarter.
WE ARE still just half-way through the results season, even though the March ’08 quarter ended long ago. A fair number of companies (though not all) have already published their quarterly numbers. Hence, we at ETIG, thought it necessary to take a quick look at India Inc’s performance so far. While this is just an interim review of Corporate India’s performance, we will carry out a detailed analysis in due course, once all the results are announced. The analysis of 1,156 companies that have published their fourth-quarter results so far offers little solace, as the trend of slowing growth rate in profits — which had been haunting Corporate India since the past six quarters — is still visible.
During the March ’08 quarter, India Inc’s aggregate sales rose by 21.5% yearon-year. But operating profit took a hit due to higher raw material costs. Annual growth in operating profit at the aggregate level was just 14.3%, in line with the slowdown witnessed in previous quarters. Further, operating margin weakened to a two-year low of 17.1%.
Corporate India’s other income witnessed a slower growth as companies incurred foreign exchange (forex) losses due to weakening of the rupee against the US dollar during the quarter. As interest and depreciation costs rose moderately over previous year figures, the before-tax profits registered just 15% growth — the lowest in the past 12 quarters.
However, the provision for taxes remained flat compared to year-ago levels. A spurt in tax provisions by companies such as HDFC and Infosys Technologies during the March ’08 quarter was neutralised by substantially lower tax provisions by Mangalore Refinery and Petrochemicals (MRPL), Bharti Airtel, Maruti Suzuki and IFCI. Hindalco Industries, which amalgamated its subsidiary, Indian Aluminium, with itself during the quarter, reported substantial write-back of tax provisions which were made in the previous quarter. However, the stagnant tax burden offered little help to companies’ aggregate bottomline, which grew by 17.1% — again the lowest growth rate in the past two years. During the preceding few quarters, the growth in bottomline was higher on account of rising other income, rather than operating performance. This trend was discontinued during the March ’08 quarter. Excluding other income, the growth in net profit was 7.5% — better than just 5% witnessed in the December ’07 quarter.
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