The Intertwined Dark Stories of Q1

The economy is shrouded in an environment of high interest rates, slowing down of industrial production and consumer demand and the macro picture is also looking not that good. Goldman Sachs has pegged the GDP growth of India at 7.8 per cent for FY2009 and 7.2 for FY2010, from 8.2 percent earlier due to a weak investment outlook. For the Q1 FY09 results, every sector had its own story to tell, albeit a sad one. A few were perturbed about the US economy running into recession, while others were lamenting on the slackening of domestic demand. All in all, it was a quarter of weak set of numbers, with a few surprises here and there. Out of the BSE 500 companies, 182 companies had declared their quarterly results as on July 27, 2008. On an aggregate basis, the top line of companies increased by 31.38 per cent in the June FY09 quarter, as compared to 26.67 per cent in the June FY08 quarter. The profits reeled under escalating input cost, be it the cost of borrowing for service companies or commodities cost for manufacturing companies or with rising energy costs for that matter. Companies witnessed a 13 per cent increase for June FY09 quarter, compared to a 42 per cent growth in the corresponding quarter of the previous year. As results are still pouring in earnings growth is likely to be in single digit. IT companies The topline of 10 IT companies that had declared results as on July 27, 2008, witnessed a 28 per cent growth for June FY09 quarter, which was more or less the same as compared to last year's growth; the bottom-line growth shrank from 30 per cent to 15 per cent, primarily because of uncertain global environment, forex losses due to over-hedged position, low volume growth, rupee appreciation and concerns over their US clients' spending. All the IT firms have expressed 'caution over the global business environment'. Azim Premji, Chairman of Wipro, admitted that "there is a fair amount of pain in the US". Besides, pain in the BFSI segment, which is the forte of many IT companies (contributes to their kitty in a big way) continues to bother them. Wipro management also acknowledged that a few clients had asked for re-negotiation of pricing, as well. As far as results are concerned, Infosys posted a net profit of Rs 1,262 crore for the quarter ended June 30, 2008, as compared to Rs 1,028 crore for the June, 2007 quarter. Total income increased from Rs 3,806 crore from to Rs 4,647 crore for the quarter ended June 30, 2008. Tata Consultancy Services posted a net profit of Rs 1,204 crore for the quarter ended June 30, 2008, as compared to Rs 1,073 crore for the quarter ended June 30, 2007. Total income has increased from Rs 4,183 crore to Rs 5,321 crore for June 30, 2008 quarter. Negative Turnarounds   Jun-07  Jun-08   Company  Net prof

This article was originally published on August 14, 2008.