India Inc's Q2 profits rise 38.7%, but topline falls

Tue, Nov 3 05:59 AM

Big caps like Reliance Industries, Reliance Communications and Bharti Airtel might have disappointed investors with their lower profits, but India Inc in general is sailing smoothly if the results for the second quarter are any indication. Results of 1,990 top companies indicate that their net profits have risen by 38.70 per cent in Q2 of 2009-10 when compared with the same quarter in the previous period.

However, total income (sales and other income) of the corporate sector has taken a beating following a dip in demand and slow growth in industrial production. Total income dipped 5.45 per cent to Rs 760,517 crore from Rs 804,340 crore in the same quarter last year.

A study by the FE Research Bureau reveals that these companies made a total net profit of Rs 70,791 crore as against Rs 51,038 crore in Q2 of last year, thanks to cost cutting, restructuring and tight controls on expenditure. Though the higher profits were against the backdrop of lower base last year, analysts said the corporate sector has redeemed itself with a better show, thereby adding to overall investor sentiment and economic growth. Telecom and oil sector companies were under pressure while banks, technology, auto and cement showed good results. Aviation companies continued to be in the red with three airlines making a combined loss of over Rs 900 crore.

According to an analyst with Sharekhan, the adjusted earnings of the companies in the Sensex are estimated to decline by 1.9 per cent during the second quarter of FY2010. "The expected 2.8 per cent year-on-year (y-o-y) decline in the earnings of the Sensex (ex-oil companies) would mainly be achieved on the back of a relatively better performance in the automobile sector (a 64.2 per cent y-o-y earnings growth), cement sector (a 43 per cent y-o-y earnings growth) and capital goods sector (a 22.5 per cent y-o-y earnings growth)," he said.

On the other hand, sectors such as real estate, metals and pharmaceuticals (pharma) are likely to act as a major drag on the Sensex earnings. Excluding real estate and metal companies, the Sensex estimated earnings would in fact register a 7.6 per cent y-o-y growth during the quarter, it said.

According to the RBI, during the current financial year 2009-10 (April-August), the industrial production has staged a recovery (5.8 per cent) from the loss of growth momentum that it witnessed during the second half of 2008-09. "Similarly, the core infrastructure sector during 2009-10 (April-August) has also displayed higher growth (4.8 per cent) over the comparable period last year, underpinned by considerable acceleration in coal, cement, and electricity," the RBI said.

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