India Inc’s performance in Q2 marginally short of expectations
Moneylife Digital Team 11 November 2010

The financial performance of India Inc in the September quarter has been decent, albeit slightly lower than anticipated. Steel products, real estate and auto ancillaries posted robust growth while cement and IT companies fell short

A large part of the widely-anticipated Q2 earnings season is almost over and investors are hoping for a good set of numbers from the Indian corporate fraternity at the end of it. Although the reported financial performance so far has been decent, it has yet to catch up with the Street's expectations.

While analysts and experts were anticipating at least a 20% rise in revenues for India Inc, the results so far have fallen marginally short of this target. Among the Moneylife sample of 1,334 listed entities, 878 companies have come out with their September quarter figures till date. These companies have managed to post revenue growth of 18% while operating profit growth stands at 17% over the corresponding quarter last year.

Among the companies that have clocked robust growth are those belonging to the steel & steel products, real estate, auto ancillaries and engineering, electronics & electrical sectors. Strong demand and higher prices aided steel products manufacturers to post healthy numbers. Varun Industries, for instance, delivered a sales growth of 205% from Rs291 crore to Rs886 crore for the September quarter, while operating profits also surged 66% over last year. Revenues for Remi Metals Gujarat jumped 118% to Rs158 crore while operating profits zoomed 328% to Rs3.7 crore. Similarly, Sarda Energy & Minerals clocked revenue growth of 96% and operating growth of 162% over last year.

Within real estate, companies like Indiabulls Real Estate, Vijay Shanthi Builders, Ackruti City and DB Realty did extremely well, albeit from a low base. While Indiabulls registered a sales growth of 2,652% and operating profit growth of 500%, Vijay Shanthi Builders' revenues surged 148% and operating profits jumped 305%. Ackruti City witnessed its revenues climb 112% with profits also rising 91%. Meanwhile, DB Realty's sales went up 98% and operating profits surged 103%.

Auto ancillaries companies have piggybacked on the phenomenal growth in volumes for the automobile industry. Companies like Automobile Corporation of Goa, MM Forgings, Porwal Auto Components, Fairfield Atlas, Premier and Bharat Forge logged strong growth in the quarter. Revenues of Automobile Corporation of Goa grew 166% to Rs109 crore while operating profits climbed 326%. MM Forgings also clocked robust sales growth of 94% with operating profits zooming 179%.

Among the engineering, electronics & electrical companies, Nitin Fire Protection Industries, BGR Energy Systems and Centum Electronics have done well.

However, cement, media and some infrastructure companies suffered a drop in financial performance. Rising raw material prices seem to be hurting cement companies badly. Gujarat Sidhee Cement, Shree Digvijay Cement, Sagar Cements and Mangalam Cement faired poorly in the last quarter. Gujarat Sidhee's revenues fell 41% to Rs51 crore but its operating performance took a severe beating, with profits tanking by 1,020%. Shree Digvijay also suffered a sharp decline in revenues (down 46%) and profitability (down 195%).

The sustained decline in financial performance of media companies continued with Zee News, Network 18 Media & Investments and NDTV exhibiting poor performance. Some construction-EPC-infrastructure companies also turned in poor numbers for the September quarter but that could be due to the inherent lumpiness of their earnings. These include Gammon Infrastructure Projects, KSK Energy Ventures, MSK Projects (India) and Punj Lloyd. 
 

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