India Inc’s Q3 profits to grow 26% on lower costs

    After battling slowing growth for nearly two years, companies listed on the BSE and NSE are likely to post an increase in profit after tax (PAT) of 25.9% year-on-year (y-o-y) for the third quarter (October-December) of the current financial year. 

    According to estimates, India Inc would post earnings growth of over 18% for the second successive quarter for the first time in two years. The growth in profitability would be largely aided by a sharp reduction in expenses, data compiled by the Centre for Monitoring Indian Economy (CMIE) showed. Total expenses of companies would increase 10.1% y-o-y in the December quarter, the slowest pace since the meltdown in the aftermath of the global financial crisis in early 2009. "We believe that the earnings downgrade cycles havecome to an end. It would be more visible in the (January to) March quarter," says Sunil Singhania, head of equities, Reliance Capital Asset Management. 
    A top official with a leading fund house says, "The worst is probably behind us. We may see upgrades (in earnings) in the middle of the last quarter (January-March)." Companies have turned their attention on cutting costs to cope with the slowdown, say market observers. 
    "There has been a decline in overall debt levels. So, interest costs too have reduced to a certain extent," says Rikesh Parikh, vicepresident, equities, Motilal Oswal Securities. 
    Salaries and wages of listed companies are estimated to have increased 13.8% in October-December 2012. The growth in salaries, which slipped in September 2011, is hovering around the 13-14% mark ever since. "There is less pressure on companies to raise salaries as they are experiencing a challenging environment," Singhania says.Selling and marketing expenses would decline 13.5% in October-December, CMIE data showed. BREAKING FREE 

• This would be the first time in 2 yrs that India Inc will see an earnings growth of over 18% in two quarters in a row 

• According to estimates, salaries at listed cos rose 13.8% in the Oct-Dec quarter 
• Analysts say most cos have focused on cutting costs