Companies struggle to perform in Q4: Crisil research

MUMBAI: India Inc is still struggling to perform to its full potential. An analysis of 391 top companies from the manufacturing and services sectors show that net profit growth, adjusted for exceptional items, is still in single digits, while revenue growth is in low double digits.

An analysis of January-March (Q4FY14) results by Crisil Research showed that although net profit has grown sharply, the numbers are influenced by Tata Steel, which took a one-time hit on writing down goodwill - amounting to Rs 7,000 crore - pertaining to its European operations in the same quarter of the previous fiscal.

Excluding the impact of this one-time write-off, aggregate net profit growth on an annual basis was 9%, marginally lower than the revenue growth. The analysis excludes financial and oil companies, and the results of Sesa Sterlite since its result is not comparable with the previous year due to the merger and reorganization within the Vedanta group.

"Aggregate revenues of 391 companies from the manufacturing and services companies increased 14% on a yearly basis during January-March quarter (Q4FY14). Ebitda (earnings before interest, taxes, depreciation and amortization) margins have improved sequentially since the December 2012 quarter, increasing by 20 basis points (100 basis points = 1 percentage point) on a quarterly basis during Q4FY14," said Mukesh Agarwal, president, Crisil Research.

"A sector-wise analysis, however, indicates stark differences in performance of companies with investment-linked sectors struggling to keep their head above water and only a few sectors such as IT services, FMCG, telecom and farm inputs doing well," Agarwal said.

The analysis also showed that export-driven sectors like IT and pharmaceuticals showed robust revenue growth due to strong underlying business fundamentals and also the depreciation of the rupee. However, the pharma industry's ebitda margins declined marginally as several multinational players were affected by the drug price control order (DPCO) in the domestic market. Aggregate revenues of the IT sector companies rose sharply by 30% on an annual basis while the same for the pharma sector was at 14%.

Consumer-driven sectors like FMCG and telecommunications just about managed double-digit revenue growth. FMCG sector's revenues increased by 11% mainly because of an increase in realizations as volume growth remained under pressure. On the other hand, the telecom sector's revenues increased by 13.4%, aided by an improvement in realizations and higher usage, and also higher data usage.