Earnings season holds out sliver of hope
Buoyed by a perceptible easing of the margin pressure, especially on account lower raw material prices and declining forex losses, companies have largely done better than during the first quarter. While topline growth has been sluggish, both profits and margins have perked up, prompting analysts to suggest that the corporate downturn could have bottomed out and a rebound is likely in the coming quarters, especially with an interest rate cut round the corner.
For 742 manufacturing and services companies (excluding oil firms) that issued their results till November 15, the overall year-on-year EBITDA margin has expanded by 14 bps (basis points, one bps being one-hundredth of a percentage point), after a decline of nearly 100-150 bps in previous quarters, according to CRISIL’s latest results update for Q2 FY’13. Notably, small-cap companies, despite a tepid 7 per cent Y-o-Y revenue growth, have reported a sharp 114 bps improvement in margins compared to a decline of 12 bps reported for large-cap companies. Strong performance by sectors like cement, pharmaceuticals, textiles, agricultural commodities and media, which have a greater share in small-cap universe, have contributed to the perceptible uptick in margins.
Large-caps that delivered above estimates included Maruti, Bajaj Auto, Dr Reddy’s, IDFC, Sun Pharma, Zee Entertainment, NTPC Ltd, L&T, HCL Tech and ICICI Bank, with a number of sectors
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