India Inc Puts up Worst Profit Growth in 5 Qtrs

High input costs, interest rate spike keep Sept quarter growth at just 4.4%

    Net profit growth at India Inc slowed dramatically in the just ended quarter as raw material costs and interest charges zoomed, an analysis of corporate results released so far shows. Results for about 494 companies shows that they posted a combined net profit growth of just 4.4%, the worst in the past five quarters. Sales grew at a much better pace, 27%, but operating profit margins fell, while financing costs, including forex losses, jumped 53%. This restricted the growth in profit before depreciation and tax (PBDT) at just 8%. The rupee depreciation was a key factor that impacted profit in a big way as companies with foreign currency loans faced a steep jump in interest costs besides mark-tomarket losses. Among those hit were MRPL, Chennai Petro, United Phosphorous, Sintex and Idea Cellular. The deteriorating business environment and rising input costs impacted the performance of Exide Inds, JSW Steel, Crompton Greaves. Cairn India's profits halved as it provided for one-time payments to ONGC. On the other hand, the infotech industry posted a mere 9.6% yearon-year growth in net profit according to the aggregates of 39 IT firms. Interest rate sensitive industries such as real estate, construction, consumer durables turned out to be underperformers. Similarly, weak market conditions and steep raw material costs took a toll on steel, auto ancillaries, textiles and packaging industries. One out of every five companies posted a loss in the September 2011 quarter. One out of every 10 posted a loss versus a profit in the yearago September quarter. The number of companies able to grow their profits from last September quarter at 217 was only slightly higher than those unable to do so. The better performers include Ultratech Cement, Petronet LNG, Hindustan Zinc, Torrent Power, Grasim Industries. In spite of the rising interest rates and worries about NPAs, a number of banks were able to improve numbers compared with the year ago period. The profit of BoM jumped 92%, while IndusInd Bank, Syndicate Bank, Federal Bank, YES Bank, HDFC Bank and Axis Bank posted 25%-plus growth. But some other public sector banks, such as UBI, disappointed. A few industries including cement, chemicals, diamond & jewellery, entertainment & media, FMCG, pharma, Infotech and capital goods were able to post numbers better than the previous quarter. A number of key results are yet to come, which could change the aggregate readings considerably. However, the weak undertones in the industry and economy are becoming more evident. The leading infra and engineering major L&T reduced its order intake guidance for FY12 on slowing investment. India's official GDP growth target has already been revised to 7.6% from initial 8% by the RBI, while the soaring subsidy bill, thanks to high oil prices and weak rupee, means the fiscal deficit target of 4.6% will be missed.