NEW DELHI: Weaker-than-expected corporate results in the second quarter of the current financial year have hit the overall sentiments in the economy, and the same is being reflected in the way the equity markets have moved in the last fortnight. The benchmark equity indices have shed around 3% since the beginning of the month, partly because of poor corporate performance in the current financial year.
Going by the trend, there seems to be no redemption for the corporate sector as far as second quarter results are concerned. A Crisil report suggests that revenue growth in the September quarter could be lowest in the past 16 quarters.
An analysis by rating agency Crisil says that India Inc is estimated to have clocked a slower revenue growth of 5-7% on-year for the three months ended September, marking the slowest pace in the past 16 quarters.
This is based on Crisil’s analysis of 435 companies that account for almost half of the listed market capitalisation. These companies posted 8.3% growth in the April-June quarter.
It attributes the disappointing quarter to “stagnant performance in the construction vertical, which accounts for a fifth of India Inc’s revenue, besides a decline in the industrial commodities vertical and subdued growth in investment-linked sectors”.
The FMCG sector is also feeling the heat of high raw material inflation and a moderate consumption growth especially in the mega cities and urban areas. The top FMCG companies which have announced their Q2 results so far have reported low single digit revenue growth. HUL’s second quarter consolidated revenue grew by 2.1% year-on-year, while Nestle reported a 1.3% revenue growth during the quarter. Tata Consumer Products despite reporting a 13% revenue growth, reported flat profit of 0.9%.
India’s largest company by market share Reliance Industries reported a 4% drop in its consolidated net profit with revenue growing at a flat 0.8%. The banking sector performance has not ignited much hope either with HDFC Bank, Kotak Mahindra Bank and Axis Bank showing muted performance.
All the three banks showed flat or negative Net Interest Margin (NIM) growth amid rising cost of capital. The IT sector companies, however, have been able to post decent numbers with Infosys lifting its revenue growth guidance to 3.75-4.50% y-o-y from 3-4% y-o-y earlier.
According to Crisil, Ebitda margin of IT companies expanded 110-130 basis points due to higher employee utilisation and lower attrition rates. According to Trendlyne, of 301 companies that have declared their results, the average revenue growth has been 11.5% while the operating profit growth has been 9%.