Top 50 cos lend weight to rebound

Excluding Infy, Sales Rise 24%

THE early results for the second fiscal quarter may have removed any remaining doubts about the 'India rebound' story, with a majority of companies posting their best performance in the past four quarters helped by a fall in raw material costs, wage bills and interest rates. Had it not been for the modest performance of IT bellwether Infosys Technologies, the first 50 companies to come out with their results would have churned out a robust 24% growth in net profit for the quarter ended September, finds an ETIG study. 
    These 50 firms are reporting an increase in net sales after two consecutive quarters of decline in revenues, clearly indicating a pickup in demand. However, a majority of these companies are small and a clearer picture of earnings will emerge over the next 10 days when more companies announce their quarterly results. Demand spike may fuel input costs 
THE findings of the study come close on the heels of a better-than-expected industrial production data for August, which prompted economists and policy makers to raise their GDP growth forecasts by at least half a percentage point. The government had estimated the gross domestic product to grow by more than 6% in the current financial year. GDP grew by 6.7% last year. 
    Growth in the past quarter is led by industries such as cement, automobiles, pharma, power and construction, said DR Dogra, managing director of rating agency CARE. "Backed by the stimulus packages and the lower-interest rates offered by banks, construction activity across the country received a significant momentum," he said. 
    Larger real estate companies are yet to announce results. Peninsula Land, the only one realty firm in the sample, reported a 52% growth in revenue for the quarter. The companies that reported high earnings growth include the country's largest storage battery maker Exide, which nearly doubled its net profit to Rs 150 crore, and midsized cement producer Prism Cement that saw its net profit shoot up 133% to Rs 35 crore. Delhi-based auto component maker Jay Bharat Maruti and ceramic tiles maker Kajaria Ceramics reported over 50% growth in net profit. 
    Higher demand in the economy is likely to fuel a rise in raw material costs in coming quarters, which could affect the profitability of Indian companies, said Madan Sabnavis, chief economist at commodity exchange NCDEX. 
    Infosys, which accounts for more than half of revenues and profits of thegroup of companies to declare results, has reported a 7.5% net profit growth over the year-ago period, as against a 30% profit growth recorded last year. 
    If we include Infy numbers, the aggregate profit growth of the group comes down to 11% for the period, which is lower than the 14% growth recorded by the same group of firms for the quarter ended June 2009. The ETIG study did not include banks as their growth is closely linked to interest rate changes, dictated by the country's monetary authorities. However, Axis Bank has reported a 32% rise in net profit while mortgage lender HDFC beat analyst estimates by posting 24% net profit growth. 
    Bombay Stock Exchange's benchmark 30-stock index Sensex, which touched a 52-week high of 17,274.59 midday, ended with a 1.23% gain on Wednesday. The index has been moving up in anticipation of improving corporate results. "The results announced till date are ahead of expectations. However, sectors like pharma, oil and metals are likely to underperform this quarter and in coming ones," said Sarabjit Kour Nangra, vice-president (research), Angel Broking. Angel Broking had earlier projected that Sensex companies are likely to report a 6% growth in revenues and 1% drop in profits for the September quarter. 
    Portfolio managers feel the current uptick in the domestic stock market has more to do with a rally on global bourses. "The market has witnessed a rally due to dollar weakness and more liquidity in the past few days. Results are more or less in line with the expectation and the markets have already factored in these valuations in the previous few months," said Manish Sonthalia with broking firm Motilal Oswal Financial Services.

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