Crunch yet to take bite out of India Inc’s sales

Early Birds Post Higher Sales In Sept Quarter, But It's A Different Story On Profit Street

 EVEN as economists and government officials are busy revising India's GDP growth estimates downwards, demand slowdown, it appears, is yet to hit India Inc. An ET study of early birds — companies who have announced their financial results for the quarter ended September 30, 2008 — shows that aggregate net sales for 175 firms have grown by a healthy 32%, which is marginally more than the 31% topline growth in Q2 FY08. Sales growth in the past five quarters is in the 27-34% range.
    Rising interest costs and high fuel and power expenses have resulted in the quarterly net profit growth shrinking to a modest 12% for the companies in the study during Q2 FY09 as against 32% growth during Q2 FY08 and a sizzling 48% growth during Q3 FY08. However, the good news is the aggregate profit growth shows a rebound in the quarter under review. Net profit growth of these firms had slumped to just 2% during Q1 FY09 and stood at 10% in Q4 FY08.
    The performance of the companies which are part of the Sensex, the benchmark stock market index, has been even better. The five companies out of the total 30 Sensex firms whose results have been announced have recorded aggregate revenue growth of 41.7%. Their bottomline grew 34% compared to the same quarter in the previous year. These five companies are Infosys, Satyam Computer, HDFC, HDFC Bank and L&T. High interest rates hit mfg sector
    THESEfive firms account for one-third of the aggregate revenues and 40% of the total profit for the 175 firms in the sample. Data for different expenditure heads show that the decline in global commodity prices has brought some relief for Indian companies. Growth in raw material costs, while still remaining high, has decelerated compared to Q1 FY09. Similarly, upward pressure on wage costs has also subsided.
    However, the high interest rate regime is playing spoilsport for corporates, and particularly for the manufacturing sector. Interest outgo for the manufacturing firms has shot up 62.5% during Q2 FY09 as against an average growth of 26% over the past four quarters. Power and fuel costs also continue to eat into margins and as a result, the manufacturing firms have reported a decline in both operating and net profit growth for the quarter. The growth of non-operating income of firms continued to remain modest during the quarter, which is also reflected in lower profit growth. Other and extraordinary income has taken a hit over the past two quarters.
    vivek.sinha@timesgroup.com