NEW DELHI: If we were to go by financial results released so far for the April-June 2020 quarter (Q1 FY21), India Inc has managed to weather the Covid-19 storm a little better than expected. Considering that the period witnessed one of the world’s strictest lockdowns in its first half, analysts had feared a steep fall in profit and revenues both.
Excluding banks and other financial institutions, which were expected to do better, most analysts had estimated a 40-50 per cent year-on-year decline in aggregate net profit and a 30-40 per cent fall in revenue. But an analysis by Motilal Oswal Financial Services (MOFSL) shows the dip may have been much shallower.
The 35 Nifty50 companies that had released results as of August 10, 2020 posted better-than-estimated figures — aggregate net profit declining by 16.3 per cent year-on-year. Excluding banks, aggregate net profit fell 22.6 per cent —steep, but only half as bad as expected.
Revenue numbers came in closer to estimates, falling 27.7 per cent overall and 28.4 per cent excluding the
financial sector. The shallower-than-expected fall in earnings is likely due to two factors: heavy cost cutting by panicked companies, and a better-than-expected revival in demand once the government began the unlocking the economy beginning late May.
The cost cutting is no surprise, a steady stream of layoffs having begun as early as April. In fact, a survey by National Council of Applied Economic Research (NCAER) shows that business confidence in the first quarter of the current financial year was at a record low, falling over 40 per cent since March.
“This is the lowest that the BCI has ever fallen in… 113 rounds (of the survey),” the think-tank said, adding that the trend was seen across all five sectors the survey tracks: consumer durables, consumer non-durables, intermediate goods, capital goods, and services. NCAER tracks 600 Indian companies to compute the composite index.
No major hit
A total of 35 Nifty50 companies that had released results as of August 10, 2020 saw aggregate net profit falling by 16.3% y-o-y
CLOSE TO ESTIMATES
Revenue declined 27.7 per cent overall and 28.4 per cent excluding the financial sector, according to MOFSL