India Inc rebounds from demonetisation blues
Thanks to the very favourable low base — Q3FY17 was the demonetisation quarter — most companies were, in any case, expected to bounce back.
With no surprises and just a couple of disappointments, earnings season is turning out to be fairly predictable. Thanks to the very favourable low base — Q3FY17 was the demonetisation quarter — most companies were, in any case, expected to bounce back. That seems to have happened especially in the consumer staples space where volumes have been very strong.
However, the rising prices of raw materials are beginning to drive up costs. Rallis, for example, reported an 11 per cent year-on-year (y-o-y) fall in ebitda even though revenues rose a robust 18 per cent y-o-y, reflecting a sharp rise in the cost of inputs.
At Maruti, too, raw material costs shot up 14 per cent but the carmaker managed to report a strong ebitda margin of 15.8 per cent, thanks to a robust revenue growth and some cost-cutting.
Management commentary from the likes of Hindustan Unilever suggests consumer sentiment is improving gradually. Indeed, volumes at smaller FMCG players, too, indicate there’s an uptick in demand. The smart 23 per cent increase in Avenue Supermarts’ revenues and the whopping 65.8 per cent growth in net profit is also an evidence of a pick-up in small ticket spends.
However, it’s a mixed bag in case of consumer spends. At Asian Paints, for instance, volumes were not as high as one might have expected — rising just an estimated 6 per cent y-o-y. This has prompted analysts to conclude it could be the reason for the company desisting from taking price hikes although input costs having risen. However, the near 30 per cent rise in home loan disbursements by LIC is encouraging.
Muted realisations at some core businesses reflect little pricing power; at Ultratech, for instance, prices were flat y- o-y and fell 5 per cent quarter- on- quarter though volumes were very encouraging. Cigarette major ITC didn’t fare too well with revenues coming off a sharp 26 per cent y-o-y on the back of weak volumes.
A read-through of the numbers suggests most companies are adjusting to changes or disruptions in the environment—either globally or locally. The continuing tariff war, for example, has eroded the profits of telecom service providers as has the tweak in interconnection charges. While Idea Cellular reported a loss of Rs 1,352 crore, Bharti Airtel’s profits plunged 39 per cent, missing the Street’s estimates. Fuel shortages hurt generation at Adani Power as a result of which consolidated revenues fell 11.4 per cent.
Drug companies continue to face regulatory headwinds and pricing pressure in overseas markets. Dr Reddy’s Laboratories reported a 29 per cent fall in consolidated nets profit; the company said was due to price erosion, increased competition and impact of adverse foreign exchange in the US and European markets. Although the global economy is looking up, there was nothing exceptional from either of the IT heavyweights Infosys and TCS.
Nonetheless, market leaders held their own ; Maruti Suzuki did well to notch up a sales growth of 14 per cent y-o-y, in line with analysts’ expectations. Indigo reported a good set of numbers with profits soaring 56 per cent on the back of a15 per cent increase in capacity and an 8 per cent increase in yields.
Havells too fared well reporting a strong revenue growth of 31 per cent y-o-y which together with lower employee costs, boosted operating profit margins by 60 basis points y-o-y.
Zee Entertainment did well to notch up revenue increase of 26 per cent y-o-y, cashing in on the revival in television advertising and gaining market share. FE
With no surprises and just a couple of disappointments, earnings season is turning out to be fairly predictable. Thanks to the very favourable low base — Q3FY17 was the demonetisation quarter — most companies were, in any case, expected to bounce back. That seems to have happened especially in the consumer staples space where volumes have been very strong.
However, the rising prices of raw materials are beginning to drive up costs. Rallis, for example, reported an 11 per cent year-on-year (y-o-y) fall in ebitda even though revenues rose a robust 18 per cent y-o-y, reflecting a sharp rise in the cost of inputs.
At Maruti, too, raw material costs shot up 14 per cent but the carmaker managed to report a strong ebitda margin of 15.8 per cent, thanks to a robust revenue growth and some cost-cutting.
Management commentary from the likes of Hindustan Unilever suggests consumer sentiment is improving gradually. Indeed, volumes at smaller FMCG players, too, indicate there’s an uptick in demand. The smart 23 per cent increase in Avenue Supermarts’ revenues and the whopping 65.8 per cent growth in net profit is also an evidence of a pick-up in small ticket spends.
However, it’s a mixed bag in case of consumer spends. At Asian Paints, for instance, volumes were not as high as one might have expected — rising just an estimated 6 per cent y-o-y. This has prompted analysts to conclude it could be the reason for the company desisting from taking price hikes although input costs having risen. However, the near 30 per cent rise in home loan disbursements by LIC is encouraging.
Muted realisations at some core businesses reflect little pricing power; at Ultratech, for instance, prices were flat y- o-y and fell 5 per cent quarter- on- quarter though volumes were very encouraging. Cigarette major ITC didn’t fare too well with revenues coming off a sharp 26 per cent y-o-y on the back of weak volumes.
A read-through of the numbers suggests most companies are adjusting to changes or disruptions in the environment—either globally or locally. The continuing tariff war, for example, has eroded the profits of telecom service providers as has the tweak in interconnection charges. While Idea Cellular reported a loss of Rs 1,352 crore, Bharti Airtel’s profits plunged 39 per cent, missing the Street’s estimates. Fuel shortages hurt generation at Adani Power as a result of which consolidated revenues fell 11.4 per cent.
Drug companies continue to face regulatory headwinds and pricing pressure in overseas markets. Dr Reddy’s Laboratories reported a 29 per cent fall in consolidated nets profit; the company said was due to price erosion, increased competition and impact of adverse foreign exchange in the US and European markets. Although the global economy is looking up, there was nothing exceptional from either of the IT heavyweights Infosys and TCS.
Nonetheless, market leaders held their own ; Maruti Suzuki did well to notch up a sales growth of 14 per cent y-o-y, in line with analysts’ expectations. Indigo reported a good set of numbers with profits soaring 56 per cent on the back of a15 per cent increase in capacity and an 8 per cent increase in yields.
Havells too fared well reporting a strong revenue growth of 31 per cent y-o-y which together with lower employee costs, boosted operating profit margins by 60 basis points y-o-y.
Zee Entertainment did well to notch up revenue increase of 26 per cent y-o-y, cashing in on the revival in television advertising and gaining market share. FE
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