India Inc?s slowing down. That?s what the first set of results for the December quarter seems to suggest. While there have been only a couple of big disappointments so far in the numbers of tech major Wipro, which reported weak earnings growth and steelmaker SAIL, which saw net profit plummet 34% year-on-year, there are signs that the growth momentum may be tapering off. Orders at engineering giant Larsen and Toubro, for instance, came off 25% year-on-year during the three months to December, while at the state-owned Bhel, new orders fell 24% year-on-year.

For a clutch of 181 companies (excluding banks and financials), the top line grew just 15.8% year-on-year in the three months to December, compared with 25% year-on-year in the September quarter. Inflation has evidently left corporates footing higher bills because total expenditure rose by 16.5% year-on-year, pushing down operating profit margins (OPM) by 85 basis points year-on-year to 18.33%. However, companies don?t seem to have forked out too much by way of interest and so net profits have grown at a respectable 15.4% year-on-year, though this is way below the 20% year-on-year rise reported in the September quarter.

The high cost of inputs continues to hurt margins. At SAIL, for instance, higher coking coal power and staff costs drove down the OPM even as the top line growth of 15% was just in line with the estimates. Again, TVS Motors posted an OPM of just 6.1%, lower than expectations, thanks to a higher raw materials bill which came in at 73.2% of sales.

At Rallis, it was higher other income and lower interest costs that drove up net profit; operating margin slid 180 basis points year-on-year thanks to higher prices of raw materials. That despite the fact that revenues were up a good 31%.

Indeed even companies that reported a strong top line struggled to hold on the margins. ITC, for example, reported a good revenue growth of 19%, driven by the cigarettes business, but the OPM came in slightly lower by 50 basis points; it was a lower tax rate that helped the company post a better net profit, up 21.4%.Operating margin at L&T too was down 150 basis points year-on-year even though the top line grew 40% year-on-year. Even at two-wheeler maker Bajaj Auto, which surprised the Street, profitability was hurt by 170 basis points year-on-year with the OPM coming in at 20.3%.

While it?s early days and results for the December quarter should be reasonably good, what?s worrying analysts is that the accompanying commentary has been cautious. The L&T management, for instance hinted there could be some downside risk to its guidance for 2010-11. While Reliance Industries reported a bottom line growth of 28% year-on-year, driven by robust petrochemicals and gross refining margins, analysts are however, a tad concerned that RIL is unlikely to ramp up gas production. At Container Corporation, the management believes that its export-import business will not do as well as it had anticipated. The good news is that there are enough companies like TCS that continue to do well.