India Inc kids leave parents far behind

NEW DELHI: India Inc's babies are outperforming their parents. An ET study of FY07 results for over 600 companies shows that net sales and reported profit after tax (PAT) on a consolidated basis have grown faster than the standalone results of their parent companies.

Consolidated results include the financial figures of subsidiaries, and better performance on a consolidated basis indicates that the subsidiaries have outperformed their parent companies.

Some of the big companies where this phenomena is visible include State Bank, Sterlite Industries, Aditya Birla Nuvo, Crompton Greaves, L&T, Ranbaxy, DLF, Wockhardt, GMR Infra, Godrej Consumer, Grasim, Dr Reddy’s, Jaiprakash Associates, Nicholas Piramal, HCL Tech, Punj Lloyd, TCS, Tata Motors, Crisil, Idea Cellular and Wipro.

The study, which analysed the results of 610 companies for which standalone and consolidated data are available, shows that total net sales on a consolidated basis grew 30.6% as against 26.2% on a standalone basis. Further, reported PAT on a consolidated basis shot up 44.6% as against 38.1% on a standalone basis for the parent company.

Total net sales for the sample companies stood at Rs 14,85,931 crore on a consolidated basis as against Rs 12,78,394 on a standalone level for FY07, as per the Capitaline database. The consolidated reported PAT was Rs 1,64,653 compared to Rs 1,42,235.4 crore on a standalone basis last financial year. This shows that while the parent companies accounted for a major chunk (about 86%) of the total net sales and profits, the subsidiary companies grew at a faster clip.

Subsidiaries are corporate entities in which the parent company has more than 50% stake. The fact that subsidiaries are performing better than their parents comes at a time when Indian companies are on an overseas acquisition binge. As a result, a number of these subsidiaries may represent an acquired overseas business.

Some of the companies that reported better performance on a standalone basis compared to the consolidated figures for both net sales and profit include Ambuja Cement, Kotak Mahindra Bank, Mahindra Gesco, Adlabs, Polaris Software, Zee Entertainment, Indian Hotels and iGate.

Of the total sample, the subsidiaries of 314 companies outshone their parents in net sales growth while the opposite was true for 228 companies. The remaining companies had equal sales growth rate for both consolidated and standalone figures.