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Servicing expensive loans amid spiralling input prices was the proverbial double-edged sword that continued to bleed Indian companies for the second quarter in a row, early bird results for the quarter ended December 2011 showed.

A healthy growth in operational income was little consolation as the falling rupee continued to rub salt to the wounds.

A Business Standard Research Bureau analysis of results declared by 219 companies showed that net profit grew 4.1 per cent from a year ago.

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This is the lowest net profit growth by India Inc in the past 11 quarters for these firms.

While, operational income grew 30 per cent for the third consecutive quarter, operating margins took a hit of 400 basis points (a basis point is one-hundredth of a percentage point), year-on-year.

Rising raw material prices and interest costs are the main culprits.

Reliance Industries, India's most valued company, reported its sharpest, 14 per cent, drop in quarterly net profit in the past two years, on higher crude prices and interest cost, principally due to a higher foreign exchange difference.

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"The global nature of our businesses and weakness in economic conditions resulted in reduced earnings in the quarter, particularly in our refining and petrochemicals businesses," said Mukesh D Ambani, chairman and managing director, Reliance Industries.

A similar trend was reflected across the manufacturing universe as raw material costs surged 51 per cent, while the interest burden increased 30 per cent during the recently concluded quarter.

JSW Steel and Bajaj Auto are other major companies where net profit was impacted due to foreign exchange differences.

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The rupee lost 8.37 per cent against the dollar during the third quarter (October-December).

In the previous quarter ended September, the rupee depreciation (it lost 9.55 per cent) alone knocked off almost a fourth of the total net profit of India Inc.

Unfavourable foreign currency movements had a cascading effect on raw material prices, impacting the overall performance of companies.

Prices of raw materials spiralled as several industrial raw materials are priced at import parity levels or are imported.

But, analysts say forex losses do not look as bad as the previous quarter.

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"The point-to-point movement was less. Further, the recent ministry guidelines on the accounting treatment of these losses have come as a big relief.

"The big damage was done in the last quarter. It looks positive now," said Manish Bhandari, managing partner and CEO, Vallum Capital Advisors.

IT, banks, FMCG, automobiles (mainly two-wheelers) and the cement sector have saved the day for India Inc by reporting an average 28 per cent growth in net profit.

Excluding these, the aggregate net profit growth would decline to 20 per cent.

"Sector-wise, banking looks good," said Girish Dev, director, Future Capital Securities. "NPL (non-performing liabilities) is a genuine concern.

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"But from a market perspective, that has been factored in. Also, there is a possibility of restructural arrangements emerging for loans to the soft infra sectors such as aviation and telecom."

Such restructuring, Dev feels, will benefit public sector banks. Bhandari of Vallum Capital also feels banking numbers have been good.

"Especially, given that the sector was beaten down for the past six months." Refineries, steel, power generation and realty have reported a fall in their net profit, while construction, aviation and textile sectors posted net losses.

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Analysts expect the sad story to continue for another quarter, at least.

"Even Q4 will be tight.

"Even if there is interest rate softening in RBI policy, respite may come only in the first quarter of next year," Dev of FCH Securities said.

Continuing global uncertainty is not helping.

However, recent coordinated efforts by European leaders have raised hopes of an end to the sovereign debt crisis.

Some emerging economies have started easing monetary policy, which is a positive to stimulate growth, say analysts.