The 20% year-on-year jump in aggregate net profits in the three months to December 2013 would suggest India Inc may be out of the woods. But read that with BHEL’s results — a 41% y-o-y fall in net profit and the order book at Rs 1 lakh crore, the smallest in 22 quarters — and it would be hard to argue that corporate India is anywhere close to a recovery.
If indeed Inc Inc was coming out of the trough, construction revenues at Reliance Infrastructure wouldn’t have collapsed 56% y-o-y and Adani Power wouldn’t have reported a loss of Rs 510 crore. Clearly, the core of the economy remains in trouble; volumes at Coal India fell 3% y-o-y while operating profits at Ambuja Cement crashed 33% y-o-y thanks to poor realisations, a sign of poor offtake by the construction sector.
Indeed, while the weaker rupee has helped shore up the top line — up 10.5% y-o-y — much of the profits have been generated because expenditure has been reined in — raw materials to sales fell 31 basis points y-o-y, helping operating profit margins expand 70 basis points y-o-y to 15.64%.
If Tata Consultancy Services (TCS) and Tata Motors are excluded from the sample of 2,441 companies (excluding banks, financials and oil marketing companies), the increase in profits would be a more sobering 14% y-o-y.
The bad news is that depreciation is up just 11% y-o-y, the slowest in the last four quarters and an indication of how slowly companies are adding capacity. The fact is that business in the home market remains dull — Tata Motors reported an Ebitda loss for its domestic operations while lower than expected realisations at Tata Steel and a forex loss led to an Ebitda miss. And while drug majors like Sun Pharma — profit up 74% y-o-y — and Dr Reddy’s — profit up 64% y-o-y — have fared exceeding well, the fact is that the Sun’s bottom line was helped by its subsidiary Taro and the Dr Reddy’s benefited from its launches in the US market.
Smaller companies continue to reel under the impact of