While the markets tanked, India Inc?s performance seem to be improving unabated. An analysis of 221 companies that have declared their results demonstrates that profit after tax has grown 31% over the same period in the previous quarter.
This shows the fundamental strength in corporate earnings ability and will always provide strong support in case the markets tank further, said a leading fund manager, not wanting to be named. These fundamentals would only improve when infrastructural hassles are cleared, he added.
Clearly, there has been improvement in productivity and companies have managed their expenses better. This is demonstrated by the fact that revenues have grown 17.63% and total expenses by 13.69%, and operating margins have improved by four percentage points and this, analysts reckon, is significant.
?Better utilisation by IT companies has been the major factor here as they form a significant part of the early results,? said Hasit Pandya, director, Twin Earth Securities, a brokerage firm in Mumbai. And there have been extremely positive results from the two leaders, ICICI Bank and Reliance, he adds. The fact that companies have provided better for taxes is also seen as a positive move as they would have to provide less amounts in later quarters and this could boost earnings in case things slow down.
However, there are two concerns. One is that interest rates have started pinching. The interest rate cost has grown by 42% in the current quarter. These costs could hurt further if rates are not bought down, believe experts.
The second concern is that the extent of other income has also increased substantially. Growing by 72% over the previous quarter, other income formed 27.46% of profit before tax in the current quarter. This has increased from the 21.40% recorded in the previous quarter. Most of the earnings have come from gains from investments and also smart moves in the foreign exchange market and are largely temporary.