The September quarter results came as a welcome breather after five-six quarters of earnings disappointment, thanks to sectors such as IT, pharmaceuticals and auto.
An analysis by various brokers shows that sales grew by 12-15 per cent for companies under their coverage as against 7 per cent in the previous June quarter. Net profit growth also clambered up from 3 per cent to 7 per cent in the latest quarter. According to Motilal Oswal report, sales of 30 companies under Sensex grew 14 per cent versus 2 per cent in the previous quarter. Operating profit grew by 15 per cent, a sharp improvement from the meagre 2 per cent growth in the June quarter. The net profit, in fact, posted double-digit growth after four quarters. After a dismal 4 per cent decline in profits in the previous quarter, 10 per cent growth in the September quarter is heartening.
Rupee impact
While subdued sales volume was reflected in the revenue growth of auto companies, rupee depreciation, better product mix and cost-cutting initiatives helped improve operating profit margins significantly. For instance, favourable currency and better product mix led to a sharp margin improvement for Bajaj Auto. Similarly, Maruti gained from rupee depreciation and cost-cutting measures.
For IT companies, along with a favourable currency movement, demand pick up in the US led to 12 per cent growth in revenues in dollar terms. Again, tailwinds from rupee depreciation aided margins. For pharma companies, the US market was a key growth driver. Dr Reddy’s, for instance, posted strong operational performance aided by launches in the US market.
The laggards
Sectors such as cement, capital goods, infrastructure and oil and gas continued to disappoint.
Weak demand environment and lower realisations continued to dampen performance of cement companies. Operating margins declined mainly on account rise in freight cost. Volume growth for companies such as ACC and Ambuja Cements was a mere 2 per cent. Delays in project execution continue to dampen the performance of capital goods companies. BHEL and Cummins India saw revenues decline by 14 per cent. Profit margins were also hit by poor operational leverage and currency volatility. However, some players such as L&T fared well due to better execution.
FMCG companies managed to report steady revenue growth, with improvement in margins on account of lower raw material costs. Within the banking space, private and public sector banks continued to witness divergent performance. Most public sector banks saw increase in non-performing assets as well restructured loans. This continued to dampen their earnings along with treasury losses in the September quarter.