'Top firms to report margins over 30%'

NEW DELHI: India's top 300 companies are expected to report a bottomline growth between 20 and 22 per cent with sales expected to rise in the range of 18 to 20 per cent in the fourth quarter of 2006-07, as per an analysis by industry chamber Assocham.

The Assocham study on soon-to-be out fourth quarter results estimates that sectors like cement, steel, capital good, telecom and FMCG are expected to take lead in the current earning season. In fact, margins in these sectors could well exceed 25 per cent.

The AEP study estimates a healthy topline and bottomline growth at least for 300 firms, which would be announcing results from the end of this week.

Despite concerns by the Reserve Bank and the government, the Indian economy was able to absorb the inflationary pressures to a greater extent. The average inflation for the year 2006-07 has been 5.3 per cent.

The price rise has not impacted the demand for both consumers as well as manufactured goods, Assocham president Venugopal N Dhoot said.

As per the analysis, cement companies are likely to witness a robust growth in the fourth quarter and for the fiscal 2007 as a whole on the back of strong volumes and high prices.

The steel firms are also expected to perform well benefiting from the rising prices. Though increase in the prices of raw material like coal, iron ore and scrap could impact the production cost, prices remained strong. The AEP study expects this sector to post margins exceeding 30 per cent.

The capital goods sector is expected to be one of the better performers and would churn out better numbers than previous quarters, not only because of revenue accruals, but also due to the slash in customs and excise duties on basic inputs such as steel and copper.

The double digit manufacturing growth, aided by infrastructure development, has meant great times for this sector. The margins for this sector as well could range between 25 and 28 per cent.

The increased per capita income and high consumer spending have been driving the growth of FMCG and telecom sectors. Both these sectors are in for good results, although telecom firms are still spending on the huge capital cost.

Since they remain in the investment mode, their performance should not be judged from the bottomline. The topline growth would be a better index for judging the performance of the telecom firms.

The FMCG sector would be driven by volumes, coupled with the fact that the firms were able to pass on the rise in raw material cost to the end consumers.

The business environment is getting tougher for banks and financial institutions with rising cost of deposits, liquidity crunch and enhanced provisioning requirements putting pressure on margins. Accordingly, the burden may get reflected in the results.