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 percent 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 eight percent 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 percent 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 percent), Mahindra & Mahindra (152 percent), Tata Power (144 percent), Hero Honda (83 percent), 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 percent 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 percent
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 percent growth in
The eight laggards among the 30 Sensex companies are
heavyweight Reliance Industries (12 per cent), DLF Ltd (86 percent), Sun Pharma (57 percent), Tata Steel (down 47 percent), Sterlite Industries (42 percent), ONGC (27 percent),
Hindalco (31 percent) and Hindustan Unilever (2.7 percent).
"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 percent YoY growth in profit. However, analysts
feel with there being many surprises in earnings figures, the
situation suggests volatility and modest predictability.