India Inc is likely to post a whoping 63 per cent growth in net profit in the second quarter, thanks to four oil marketing companies which are expected to post a combined net profit of Rs 2,730 crore (Rs 27.30 billion) in the quarter ended September.
The morning doesn't always show the day. After the early birds surprised many with their decent increase in net profits, a detailed analysis of the performance of 2,088 manufacturing and services sector companies (excluding banks and finance firms) shows that net profit has indeed gone up -- but only just.
From a single private firm with a Rs 1,000-crore (Rs 10 billion) net profit, there are 28 such companies now.
Operating margins improve, but sales still sluggish
The 193 companies have proposed a dividend payout of Rs 16,764 crore (Rs 167.64 billion) for 2008-09 on a net profit of Rs 92,412 crore (Rs 924.12 billion) compared to Rs 15,328 crore (Rs 153.28 billion) paid on a net profit of Rs 84,790 crore (Rs 847.9 billion) earned in 2007-08.
The net sales of these outperformers grew by 57.7 per cent, while their net profit rose by 69 per cent in the nine months of the current financial year over the same period of the previous year.
The poor performance of the corporate sector in the current financial year is reflected in the fact that the number of sectors posting net losses has more than doubled quarter-on-quarter -- from seven in the first quarter to 15 in second to 37 in the third quarter.
Foreign currency convertible bonds (FCCBs) are proving to be a double-edged sword with large premiums simply vanishing on account of bear markets and the ghost of redemption at yield-to-maturity (YTM) hanging on.
As many as 2,431 firms in manufacturing and services sectors post their biggest-ever net profit decline of 42.45 per cent.
There are very few takers for B Ramalinga Raju's astounding claim that the margin earned by Satyam in the quarter ended September 2008 was just 3 per cent, and not 24 per cent as reported in the results.
Once criticised as inhibitory, India's strict regulatory norms have protected local banks from the global financial tsunami.
The global credit crisis has slowed order growth of Indian construction and engineering companies, indicating that several big projects, planned earlier, are being pushed back either for lack of capital, or because they have become unviable now.
The tide for Indian firms seems to be turning. As much as 41 per cent of companies announcing their second-quarter results have registered a drop in profit.
Sales of 137 firms up 29.7%, but operating margins dip.
After four years of growth at 40 per cent or more, capital expenditure (capex) by India Inc in the current financial year (2008-09) may drop almost 30 per cent.
The combined stake of foreign institutional investors in the top 500 Indian companies has dropped to a two-year low of 18.18 per cent as on June 30, 2008 from a high of 19.86 per cent in the corresponding period a year ago.
The high interest rate regime is unlikely to hit larger companies' ongoing projects, at least for now.
As a result, new projects may have to be put on the backburner.
Weighed down by a sharp rise in input costs and limited ability to pass on the burden to customers, India Inc's operating margins took a hard knock in the first quarter of 2008-09 even though demand was buoyant as reflected in zooming sales.
Analysis of data published by 1,074 manufacturing companies with turnover of at least Rs 1 crore (Rs 10 million)(shows they were sitting on unsold finished stock worth Rs 18,950 crore (Rs 189.5 billion) at the end of 2007-08, up almost 70 per cent from Rs 11,164 crore (Rs 111.64 billion) a year ago.
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