A majority of Indian companies reported slumps in the past quarter. But a few did escape unhurt
20-May-2008 •Research Desk
These are the times of a mini depression. An economic slump has taken over the globe and its effects are apparent from the quarterly results of most companies. As compared to the quarters gone by, the results declared by companies for the quarter and year ending March 2008, paint a shoddy and depressing picture.
Value Research analysed the results of the companies that had declared quarterly and annual results till April 23, 2008. The analysis shows that while the top-line of the Indian companies has grown at a faster pace, the bottom-line has failed to impress, with most companies being unable to duck the depression bullet. For the quarter ending March 2008, the top-line of the companies grew by an impressive 38.28 per cent, as compared to 18.63 per cent last year. However, sluggishness on the profit parameter was evident as growth slipped from 38.59 per cent to 22.08 per cent. Some companies that reported decline in profits include Power Finance Corp. Ltd (-19.9%) and New Delhi Television Ltd (NDTV) (-157%).
Reliance Industries, on the other hand, reported a jump in profits on the back of the surging crude oil prices (now flirting at $120 per barrel). The company posted profits of Rs. 39.12 billion, up by 24 per cent from a year ago. Other companies that did well were Infosys Technologies, reporting an increase of 20.41 per cent in net sales and 9.18 per cent increase in profits. Elsewhere, Zee Entertainment saw a 37 per cent rise in profits and HCL Technologies showed a 10 per cent rise.
In the banking space, Axis Bank's profits were up by 70 per cent, from Rs 211.89 crore for the quarter ending March, 2007 to Rs. 361.40 crore for the quarter ending March, 2008. The bank's total income also increased from Rs. 1642.61 crore to Rs. 2571.90 crore. YES Bank saw rise in profits to the tune of 108 per cent, coming out clean in all its positions in derivatives and credit-linked note markets.
The most impressive performer of the quarter was Motilal Oswal Financial Services. The Broking house emerged unscathed from the market meltdown and reported stupendous results of a 75 per cent rise in income (Rs. 190 crore). The company's profits after tax grew by 93 per cent to Rs. 44 crore from last year's figure of Rs. 23 crore.
Moving on to sector specific details and on annual baisis, the staff cost for Information Technology companies has taken a hit, because of some very obvious reasons (appreciating local currency and the US slowdown for the uninitiated). Salaries and wages expressed as percentage of sales of IT companies plunged to a low of 41.29 per cent for financial year 2007-08, as against a towering high of 44.41 per cent a year ago. The figure for 2005-06 was 41.82 per cent.
Furthermore, the interest expense for companies expressed as percentage of sales, increased from 2.99 per cent for financial year 2006-07 to 3.20 per cent for FY 2007-08, increase of over 7 per cent. The figure for financial year 2005-06 was at 2.94 per cent
The slump in net profits could be attributed to a slew of factors, including rising cost of inputs or raw materials, a slowdown in overall industrial production and the soaring inflation. All of the above factors are here to stay, implying that the worst may not be over, yet!