India’s top firms have reported weak bottomline growth for the quarter ended September 2014.
Net profits of the BSE-30 Index (Sensex) firms grew 6% year-on-year in the September quarter, well below expectations of 10.1% growth, says a study by the Kotak group. These companies had showed 19.3% growth in the first quarter ended June.
EBITDA (earnings before interest, tax, depreciation and amortisation) increased by just 1.8% as against the estimate of 5.8%.
Underlying trends in banks (high bad loans and slippages) and consumer staples (low volume growth) remained weak but order inflows picked up, suggesting potential economic recovery in the next 2-4 quarters.
Credit growth of the banking sector dipped to 9.7% in September
Muted growth in net profits in the September quarter will temper the Street’s expectations of accelerated earnings.
1. Underlying parameters such as loan growth, credit quality for banks and volume growth for consumer and cement companies remained weak.
2. It is perhaps too early to expect a structural economic recovery although the government is implementing reforms for higher growth.
3. Order inflows of major industrial firms picked up, indicating a potential recovery in the investment cycle
4. Kotak expects weak GDP data for second half given continued weak investment demand and likely reduction in plan expenditure by the government in order to meet its gross fiscal deficit at 4.1% of GDP.