June quarter corporate earnings may be one of worst in 3 years: Assocham

NEW DELHI: June quarter corporate earnings are likely to go down as one of the worst in the last three years with companies in automobile, realty, road and airport infrastructure, capital goods and engineering sectors expected to see significant pressure, according to a survey.


"With the economy under stress, corporates across a large number of sectors are set to report significant drop in their top line sales and net earnings in the first quarter of the current fiscal ending June, 2013," the CFO survey conducted by industry body Assocham said.

As per the survey, as many as 81 per cent of the 131 CFOs covered in the survey indicated that corporates in these segments would report bad earnings during April-June FY'14.

"The first quarter of the fiscal 2013-14 is likely to go down as one of the worst in the last three years with the situations deteriorating fast rather than improving," it said.

High interest rates, shrinking margins in the wake of huge pressure on sales, rising cost of raw materials and inability to raise fresh resources are among the biggest challenges being grappled with the Chief Finance Officers (CFOs), survey said.

The situation is likely to persist in the second quarter of the current fiscal as well, it added.

Assocham said the biggest worry is among the listed banks because of deteriorating quality of assets.

"...the gross and net non-performing assets (NPAs) in the sector, particularly among the public sector lenders, are going to balloon," it said.

The survey showed currency depreciation has added to the woes of banks as unhedged exposure to currency market by borrowers is going to have further negative impact on the asset quality front.

Increasing inventories in automobiles, realty, media firms are causing cash flow problems leading to cost-cutting on travel, hotels, marketing, promotions and brand building.

This, in turn, is causing a bruising impact on country's services sectors like hotels and airlines, Assocham said.

The collateral damage would be reflected by businesses engaged in entire travel and tourism, the finance officials of these companies said in the survey report.

Listed companies in these allied services sector would also report drop in net earnings and see pressure on their topline, it added.

"Even those who have cash are sitting on the sidelines. The listed PSUs are classic examples...The times are uncertain and the industrial growth is slowing the corporate earnings," Assocham said.