INSUBCONTINENT EXCLUSIVE:
NEW DELHI: It's a sweet and sour feeling the way March quarter earnings have panned out so far.
The short point is there were only a few
positive surprises as the season enters its last lap
And the numbers at best are in line with market expectations
A few consumption-driven sectors continued with their recent volume-driven growth
But red flags are going up
Rising raw material costs could play a spoilsport for some of them, going ahead
PSU banks with record losses disappointed the most
Combined sales of 1,040-odd companies -- apart from PSU and private banks -- climbed 14.9 per cent while their net profit surged 37 per
cent on a low base last year
The March quarter of 2017 turned out to be painful for India Inc because of the cash ban announced in November 2016.
Top line rose to Rs
11,55,547 crore compared with Rs 10,05,488 crore in the year-ago quarter
The bottom line for the universe swelled to Rs 1,06,437 crore from Rs 77,801 a year earlier
On a sequential basis, sales for these companies went up 7.62 per cent
Profit advanced 4.14 per cent, Capitaline data showed, as compiled by ETMarkets.com.
Banks, especially PSU ones, made jaw-dropping NPA
provisions during the March quarter
The result: as many as 14 banks reeled under losses amounting to Rs 46,593 crore
This includes PNB's record loss of Rs 13,416.90 crore
SBI (Rs 7,542 crore), Canara Bank (Rs 4,860 crore) and Allahabad bank (Rs 3,510 crore) suffered huge losses too
To give you a perspective, these 14 PSU lenders had reported Rs 4,338 crore loss in the year-ago quarter
If private and public lenders are taken into account, the 1,070 firms reported a 15 per cent drop in net profit at Rs 71,072 crore for
January-March.
"So far, the earnings season has been on expected lines
The upgrades and downgrades are by and large equal to each other following which the earnings estimate for the next year has only been
marginally cut by about a per cent," said Neelotpal Sahai of HSBC Asset Management India.
From the Nifty bloc, Eicher Motors, Asian Paints,
SBI, Axis Bank, ICICI Bank, Vedanta, HCL Tech, Wipro, Bharti Airtel and Bharti Infratel fell short of profit estimates
Others such as Bajaj Auto, UltraTech Cement, Hindustan Unilever, Bajaj Finance, HDFC, Lupin, Zee Entertainment, Hindalco, Tata Steel and Yes
Bank came out on top.
"Consumer-oriented sectors from paints to consumer staples delivered not only good results, but very strong commentary
on revenue and margin expansion
In some ways, that bullish guidance actually surprised me because I felt that commodity price spike would make them a little more
circumspect about margins
Both consumer discretionary and staples are doing fine
Energy companies too performed well," Manishi Raychaudhuri of BNP Paribas told ET Now.
For the FMCG sector, what worked is the revival in
rural growth, which has beaten the figure for urban areas for three quarters now
Metal companies have been putting up a strong earnings show, buoyed by a pick-up in metal prices
This partly hurt outlook for automakers though, which points to further impact of raw material inflation in H1 FY19
They may partially try to offset it by passing on the cost to consumers, said Motilal Oswal Securities
For the IT sector, FY19 should see an improvement on a low FY18 base, but the outlook is not exactly euphoric, the brokerage noted
According to Raychaudhuri, the currency depreciation has been a tailwind for software firms.
Clearly, the squeeze was on the telecom sector,
which saw ARPU downtrading due to renewed competition
That means Ebitda margin for the telcos may remain under pressure, going forward.
"In oil and gas space, refining margins have been good
Marketing margins have also been good after a tepid Q3 FY18
Outlook remains uncertain in light of high oil prices, a depreciating rupee, unwillingness of the government to cut excise duties on auto
fuels, and the upcoming elections," Motilal Oswal Securities said.
Results of cement companies came in above expectations, led by
lower-than-expected price decline and a better cost curve
The impact of higher petcoke and diesel prices was mitigated by better operating leverage and other cost efficiency measures, the brokerage
added.
So, where does that leave us with The market will continue to be more truncated in favour of companies that can grow with earnings
visibility, said Dhananjay Sinha of Emkay Global Financial Services.
