Friday, August 31, 2012

INDIA INC.: Q1 RESULTS

Slowdown is over and the outlook is bright. Still, India Inc.’s profitability has taken a hit in the very first quarter of the fiscal when the country is expected to grow at 9.4%. Avneesh Singh analyses the reasons for the dismal show

Nevertheless, it will certainly be unfair to say that everyone in India Inc. is a culprit of poor performance. A sectoral view of the results indicates that while sectors like Banking and Metals have posted brilliant report cards during the quarter, sectors like Oil and Gas and Telecom have turned out to be the spoilsports. A resilient job market, improving real estate sector and low lending rates certainly added to the performance of Indian banks in Q1. As pointed out by Rajat Rajgarhia, Director – Research, Motilal Oswal Securities Ltd, “For large banks (except ICICI Bank), loans grew above industry average of 20% y-o-y.” Overall PAT performance of the banking sector remained above expectations led by a strong core operating performance by state owned banks in particular. A y-o-y analysis of top 20 banks suggests a 30.3% growth (15% q-o-q) in aggregate PAT in the last quarter. Talking to B&E O. P. Bhatt, Chairman, State Bank of India points out, “Increase in net interest margin and decrease of high cost deposits were the main reasons for such increase in profits.” Moreover, the sector is expected to carry on its good work for the rest of the year as well. Commenting on the reason for the same Chandan Taparia, Banking Analyst, Anand Rathi, says “Demand for all kind of loans is growing with the growth in the Indian economy, so it is all positive for the banking sector going ahead.” But then, there is a word of caution as well as he further adds, “The only obstacle visible for the sector at present is RBI’s rate hikes to control inflation.” Also, if new industrial houses are given banking licences in this year itself, then the ride may not be as smooth as it looks at present as renewed competition and pressure on margins come into the picture.

What may be a possible dampener for the banking sector in the latter half of the fiscal was witnessed as a problem for Indian telecom companies in the first quarter itself. The ongoing tariff wars proved really fatal for telcos like Reliance Communication, which saw a mind-boggling 233% y-o-y decline in its profits for the first quarter. The company posted loss to the tune of `4.90 billion as compared to a profit of `3.70 billion in Q1 last year. Overall, the industry (analysis of top 4 telecom service providers, which control nearly 67% of the market share) has reported erosion of more than half of its reported profit in Q1FY’10. The IT biggies had a better time in comparison. While Infosys net profit declined by 2% yoy, TCS and Wipro posted a robust yoy rise in PAT by 22% and 31% respectively. However, fears of global uncertainity remain, particularly in Europe.


Posted by at
Labels: , , , , , , , , , , , , , ,