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Going by the first set of results for the December 2013 quarter, corporate India seems to be back on track. However, while the headline numbers for a clutch of 56 companies (excluding banks and financial companies) appear encouraging ó revenues in Q3FY14 are up 13.46 % year-on-year while net profits are higher by 20.7% y-o-y ó a closer look reveals several stress points.
For one, the top line growth is much slower than the 17.5% y-o-y seen in Q2FY14, although companies would have benefited from a depreciating local currency. Moreover, if the operating profit margins (OPM) have moved up slightly to 16.5%, itís partly because companies have reined in total expenditure, up just 12.7% y-o-y in the quarter. Also, the share of raw materials to sales has fallen by155 basis points.
The bottom line has been bumped up by sharp jump in other income and worryingly, depreciation charges have fallen, indicating the slowdown in investments. The tech space continues to do well ó from Infosys to Tata Consultancy Services, there have been no real disappointments.
Among the heavyweights that have announced results, ITC turned in a reasonably good show despite an estimated drop in cigarette volumes but profits at Reliance Industries were flat as gross refining margins fell and the petrochemicals segment stayed under pressure.
Motorcycle maker Bajaj Auto reported a drop in sales, not unexpected given volumes had come off sharply. Moreover, average realisations came in lower sequentially, due to what analysts believe was an inferior product mix.
Profits at smaller firms like Exide have been badly dented given the weak demand for batteries in a sluggish economy ó net profits crashed 26% y-o-y. Others like Rallis, however, have put reasonably good results with consolidated revenues growing 17%. Hindustan Zinc reported good zinc volumes, up 17%, although adjusted profits rose just 7% y-o-y despite the company benefiting hugely from the weaker rupee.