India Inc on track in Q3 despite slowdown fears
The market is agog with talk of a likely slowdown in the world economy and its drastic impact on India. The corporate results for the December 2007 quarter declared so far, however, have given no hint of a likely slowdown.
By Krishna Kant & Kiran Kabtta, TNN |
With market gyrations attracting most of the attention this week, the third-quarter results of India Inc has taken a backseat. The market is agog with talk of a likely slowdown in the world economy and its drastic impact on India. The corporate results for the December 2007 quarter declared so far, however, have given no hint of a likely slowdown.
In fact, the early bird results of 427 companies show acceleration in revenue and profit growth. Surprisingly, the apparent acceleration has come after four consecutive quarters of deceleration in the revenue growth of these companies.
The results have fairly met market expectations, despite market being in no mood to acknowledge it this week. The bulk of the results are scheduled to be declared during the last week of the month, but it would be interesting to note the trend emerging across the aggregate results declared by these companies. A look at the revenue and profit growth trends over the past six quarters bring out some interesting points.
In fact, the early bird results of 427 companies show acceleration in revenue and profit growth. Surprisingly, the apparent acceleration has come after four consecutive quarters of deceleration in the revenue growth of these companies.
The results have fairly met market expectations, despite market being in no mood to acknowledge it this week. The bulk of the results are scheduled to be declared during the last week of the month, but it would be interesting to note the trend emerging across the aggregate results declared by these companies. A look at the revenue and profit growth trends over the past six quarters bring out some interesting points.
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After having been on a declining trend, total net sales have shown a robust growth this quarter. The good thing is that faster growth in net profits has been supported by an equally robust growth in net sales and operating profits. Likewise, growth in operating profit, which was softening since past three quarter, has seen a resurgence this time.
Net profit growth has also been helped by deceleration in interest costs. This may be due to recent softening of interest rates and completion of borrowing programmes of corporates for their capex plans. The latter is confirmed by a sharp 28% rise in depreciation allowance during the December quarter.
In previous two quarters, depreciation has shown a negative growth. It also points towards the source of acceleration in revenue growth. It seems many companies have begun to gain from the commissioning of their expansion projects. If this turns out to be true, then we can expect further acceleration in revenue and profit growth in the coming few quarters.
The only risk being a decline in sales realisations, if too much capex comes to the market in a short time. The market observers seem to agree. “The Q3 results have been much in line with the market expectations and the current growth in earnings is likely to be maintained for the fiscal year going forward,” says Shahina Mukadam, Head Research, IDBI Capital.
Other experts are equally optimistic about the forthcoming quarters. “The general observation has been that most companies’ results have beaten the market expectation including IT. Earning projections for FY08 have to be upgraded,” R Rajagopal, chief investment officer of DBS Chola Asset Management Company told ET.
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