MUMBAI, FEBRUARY 2: The third-quarter results of a host of industries show thateconomic recovery is still far from certain. The financials of top companiesacross a spectrum of 12 key industries indicate that the much-hyped recoveryremains elusive. First, the overall picture. The total net sales and netprofits of 38 well-known corporates show a marginal growth of 0.63 per centand -3.37 per cent (negative growth) respectively, compared with theirsecond quarter performance. Clearly, growth in these companies isfaltering.The results of the study show that, apart from an impressive growth of 34per cent in the hospitality industry, there has been a negative or marginalnet sales growth trend across industry. The dismal showing in topline growthdoes not augur well. This is particularly because the growth of consumerdemand, which was responsible for the recovery, may be slowing down. As theCentre for Monitoring Indian Economy (CMIE) has pointed out, the decline inagricultural production and a slowdown in fresh investments could lead to atapering off of industrial growth in the coming months of the fiscal.
A glance at the accompanying table shows that topline growth during thirdquarter, compared to second quarter, has been negative for the companiesselected in the pharmaceuticals, FMCG, aluminium, petrochemicals, as well asthe diversified sector. Even where growth has been positive, it hasn't beenvery robust. For example, companies in the paper sector have shown toplinegrowth of only 2.34 per cent. In the iron and steel industry, the growth hasbeen only 1.75 per cent.However, for banking sector, topline growth has been3.85 per cent, indicating that overall credit growth has started pickingup.Bottomline growth has been negative in automobile, pharma, FMCG, paper,cement, petrochem and diversified companies.
As a matter of fact, the positive growth trends in the net profits ofindustries like aluminium and banking have been due to better operatingmargins than growth in sales. As the table shows, bottomline growth in theiron and steel industry has been due to a 416 per cent increase in Tisco's"other income".The negative growth in the information technology industryhas been due to the poor third-quarter performance by NIIT. The much-toutedrecovery in the automobile sector seems to be associated only with certaincompanies in the sector. Poor growth in the FMCG and automobile industriesproves the lack of growth in consumer demand. The giants in thepetrochemicals industry, and big diversified companies like Grasim, L&T andVoltas, also registered a significant reduction in sales as well asprofits.
Of the 12 industries shown in the table, six have negative sales growth andeight have clocked negative profits growth compared with the second quarter,which is contrary to the widely-held belief of economic recovery.
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