Tuesday, February 04, 2014
Signs of green shoots as companies' Q3 profit grows 24%
Mumbai, 4 February, 2014: There are early signs of green shoots in the quarterly results announced by top Indian corporates. The aggregate results of 289 companies, excluding banking & financial services and oil companies, showed that during the quarter ended December 2013, their EBITDA (earnings before interest, taxes, depreciation and amortization) margins have improved by 131 basis points (100 basis points = 1 percentage point). This came mainly on the back of gains from rupee depreciation that supported sectors like IT and pharmaceuticals and higher realizations that improved margins of sectors like telecom, two-wheelers and FMCG, an analysis by Crisil Research said.
Outside of these sectors, "early results of companies in capital goods and construction sectors indicate margin expansion on account of low base and cost-cutting initiatives," said Mukesh Agarwal, president, Crisil Research. "However, sustainable improvement in margins is possible only after the demand environment improves," he said.
On the revenue side, led by sectors like IT, pharmaceuticals, media and power, aggregate revenues during the quarter were up 13.7% at Rs 3.21 lakh crore, while the growth in net profit for these 289 companies was 23.8% at Rs 33,897 crore. In contrast, sectors like commercial vehicles, cement and capital goods have seen a decline in revenues, the analysis showed. The analysis also found that weak demand continued to impact the automobile sector, especially the commercial vehicle segment, while cars and two-wheeler companies saw some margin expansion on account of cost reduction initiatives and rupee depreciation supporting their export realizations.
Outside of the manufacturing and services sectors, oil exploration & production sector reported a 17% growth in revenues on an annual basis, which was again driven by the rupee's depreciation and 10% increase in production. However, EBITDA margins declined by 468 basis points on a year-on-year basis, mainly led by an increase in exploration costs on account of higher exploration activities, higher revenue sharing with the government and increase in employee benefit expenses due to a one-time charge on account of change in the valuation methodology of ESOPs. In the refining sector, revenues grew 10%, again because of the depreciation of the rupee against the dollar.