Companies Q1 net falls 8% since previous quarter
MUMBAI: Initial results by India Inc during the April-June quarter paint a poor picture about the current health of the corporate sector. Aggregate net profit of 49 large- and medium-sized companies which have announced their results so far shows a 8.4% decline on a quarterly basis, although it has grown 25.1% on an yearly basis.
This rise in aggregate net profit is largely attributed to the software service exporters' gains from the depreciation of the rupee. If one excludes the IT companies, the year-on-year (y-o-y) growth in net profit falls to a mere 2.7%; while at 32.3%, it falls on a quarter-on-quarter (q-o-q) basis, an analysis by Crisil Research showed.
The 49 companies whose Q1FY13 results have been considered contribute 14% to the NSE's total market capitalization.
Overall revenue growth, excluding IT companies, was at just 12.5% (y-o-y), mainly due to continued pressure on demand, although overall growth for all companies, including the IT sector, remained at a healthy 23.5% due to rupee depreciation. "The rupee revenue of IT services grew by 34.2% y-o-y on the back of a significant rupee depreciation (21.2% y-o-y against US dollar). Dollar revenue of IT companies grew by only 9-10% y-o-y," the report pointed out.
"As expected, early results indicate a significant deceleration in revenues. We believe that the weak demand environment has started impacting revenue growth," said Mukesh Agrawal, president, Crisil Research. "Moreover, despite flat EBITDA margins (excluding IT), net profit growth is only 2.7% due to elevated interest costs," he Agrawal.
The effect of rupee depreciation is also evident in the trend of margins, gross (EBIDTA) and net profits. For all the 49 companies, EBIDTA margin for the quarter rose 130 basis points (100 basis points = 1%) on a y-o-y basis, but if one excludes the IT companies, the corresponding growth number was just 2 basis points.
Although it is still early days, market players remain concerned about the foreign exchange losses suffered by India Inc. "Anywhere FX (foreign exchange) is involved, people are very cautious," said Arun Kejriwal, director, KRIS, an investment research and advisory firm. He also pointed out that so far only the large- and medium-sized corporates have announced their results, and small and marginal ones are yet to come.
Among the large corporates that have already announced their results include HDFC, Infosys, TCS, HDFC Bank and Reliance Industries. Some of the big companies expected to announce results this week include HUL, L&T, Jindal Steel and Wipro.
