There have been a couple of surprises but by and large India Inc?s performance in the three months to June 2010 has been in line with expectations. A sample of 227 companies shows growth in earnings is moderating as anticipated. The rise in net profit is up just about 17% year-on-year, compared with an increase of 43% in March 2010 y-o-y quarter. Although the growth in the top line in both quarters has been similar, higher raw material costs in June quarter have eaten into operating margins? down 166 basis points.

The Street has taken it into its stride. Says Anup Maheshwari, head of equities and strategy at DSP Blackrock, ?Clearly growth rates are coming off and we?re expecting broad market earnings to grow at about 20-22% this year with most of the growth being back-ended. There have been some minor disappointments but otherwise numbers are in line with estimates.? Moreover, as HSBC points out, IIP growth has peaked with capital goods and intermediate goods reaching extraordinary heights and so industrial activity has cooled but the services sector is ?kicking up a notch.?

With flat power division revenues, Crompton Greaves has been left with lower-than-estimated consolidated net profit, which is up 19% at Rs 191 crore, although operating margins expanded 160 basis points to 13%. While Thermax reported a robust 42% increase in bottom line, it came off a low base and analysts say apart from one Rs 600-crore order, inflows lacked significant traction compared with quarterly average for 2009-10.

The big disappointment was Dr Reddy?s Laboratories, which saw a fall in profits, with the drug major unable to do well in the US generics market. Revenues came in about 10% below estimates. Container Corporation too reported flat revenues, and as a result profits fell 4%. Ambuja Cements? operating margins of 29.5% fell short of estimates as the benefits of lower raw material expenses were lost to non-recurring overheads and higher power costs. Sister concern ACC reported a 26% fall in net profits to just under Rs 350 crore driven by a small 3% drop in the top line.

However, as HSBC notes, ?There is no clear sign of a drop in final demand as motor vehicles sales continues to rise.? Bajaj Auto surprised the Street with higher-than ?expected net profit of Rs 590 crore, up 101%, but that was due to higher other income. Nevertheless, the motorcycle maker managed to post an operating profit margin at 20% despite a steep increase in input costs—–raw materials to sales was up 500 basis points y-o-y— thanks to better export incentive realisations. Again, despite an estimated fall in sales volumes of cigarettes for the three months to June 2010, ITC managed to grow its revenues for this segment by 12% on the back of a 15% price increase. That helped the firm report an increase in total revenues of 18% and a rise in its bottom line of 22%, way above analysts estimates of 17%. Idea Cellular too delivered top line numbers and bottom line numbers that were slightly ahead of estimates but analysts are concerned about the sequential drop in the operating margins by more than 300 basis points to 24.3%.

Most banks (not part of the sample) have turned in good profit numbers. Supported by strong growth in core income which rose 34% y-on-y and flat provisioning for loan losses, Canara Bank reported a smart 82% growth in its bottom line.

Private sector lender Kotak Mahindra Bank was able to grow its loan book by 42 % though its net interest margins came off sequentially. Punjab National Bank however, saw slippages at 2.6% of loans, that were somewhat disconcerting.