Friday, August 31, 2012

Silver cloud, dark lining!

Slowdown is over and the outlook is bright. Still, India Inc.’s profitability has taken a hit in the very first quarter of the fiscal when the country is expected to grow at 9.4%. Avneesh Singh analyses the reasons for the dismal show

Rs 1894.78 billion! This was the amount that corporate India raised in the last fiscal through private placement of corporate bonds. Interestingly, it’s the highest amount that India Inc. has mobilised in this fashion in any single year during the past decade; a clear indication of how positive the global investors are in their outlook towards corporate India. But are Indian companies measuring up to expectations? Or are they are just playing on their past reputation?

Well, if the first quarter performance of India Inc. is anything to go by, the answer is much in the negative. Though gradually recovering demand, both in domestic and global markets, has come to its rescue, India Inc. is struggling to deal with rising input costs and thus facing the problem of declining bottom-lines. There is no doubt that a few companies have showcased stupendous results, but the poor performers outnumber them quite convincingly when one considers the overall performance. For example, when B&E looked at the cumulative result of 475 of the BSE 500 companies (whose first quarter ended on June 30,2010), the result was a surprise. Though cumulative revenue of these companies for the quarter surged by18% on a year-on-year basis to `7.4 trillion from `6.2 trillion in the corresponding quarter of the previous financial year, their net profit after tax has declined by 11.85% y-o-y to `624.43 billion from `708.35 billion that it managed to mop up in the first quarter of FY’10, which was even more trouble ridden.

Moreover, the situation looks worse, when we make a quarter-on-quarter comparison. In that case, the revenue advantage seen earlier is also missing. As per the cumulative data for the above mentioned companies, total revenue has gone down by 7%, while profit has taken a hit of 22%. But then, as industry experts put it, the cumulative results should not be much of a surprise as industry heavyweights like Maruti Suzuki, Tata Steel, Reliance Infra, Jaiprakash Associates et al, which form a large chunk of India Inc.’s total revenue, have performed poorly during the quarter. As confirmed by Navin Agarwal, CEO – Institutional Equities, Motilal Oswal Securities Ltd., “Only 6 companies (out of the 30 BSE Sensex constituents) have reported higher than estimated profit after tax.”
 


Posted by at
Labels: , , , , , , , , , ,