If Tata Consultancy Services (TCS) delivered an outstanding set of numbers drumming up revenues of R17,987 crore, a jump of 21% yoy, Ashok Leyland turned in shockingly poor results posting a 22% yoy drop in turnover for the three months to June 2013. While the June quarter earnings seasons has seen some good performances, it?s evident Indian industry is struggling to make ends meet. The problems begin at the top line: for a sample of 93 companies (excluding banks and financials), net sales for Q1FY14 were flat compared with a 3% yoy growth in Q4FY13, 11% yoy in Q3FY13 and 15.5% in Q2FY13. Whether it?s refined products or motorcycles, companies are having a hard time selling them; revenues at Reliance Industries Ltd (RIL) fell by close to 5% yoy while at Bajaj Auto sales were flat at R5,087 crore with motorcycle volumes down 12% during the quarter. The commentary has ranged from the confident to the cautious; while the MD & CEO of TCS, N Chandrasekaran, sounded reassuring with his assessment of the environment, Bajaj Auto MD Rajiv Bajaj was understandably circumspect pointing out these were uncertain times and it would be imprudent to look too far ahead. If net profits for the sample are up 13%, it?s because costs have been reined in, depreciation charges have fallen and because companies have earned more other income; operating profits are up just 6.7% yoy, indicating how sluggish the environment is.
Going by the results put out by the handful of banks for Q1FY14 it would seem like the slowdown in the economy isn’t going away in a hurry. The headline numbers are, in themselves, not really disappointing?HDFC Bank, for instance, dutifully reported a 30% profit growth while for Axis Bank it was 22%?but they mask much of the weak demand environment. The increase in HDFC Bank?s pre-provision profits, net of trading gains was just 19% yoy, not so inspiring?and analysts noted a certain cautiousness in the management?s tone?it now expects bank loans for the industry to grow by just 13-14% this year. Clearly, therefore, demand for credit is slackening?the Kotak Mahindra Bank management trimmed its loan growth guidance to 15% from the earlier 20%-plus. Given how companies are cutting production?especially auto manufacturers?and scaling back capex, it?s not surprising banks are lowering loan growth targets. Indeed, since they would be engaging with companies across sectors, the smaller lending targets suggest banks are not expecting corporates to make any big investments in the near term; for more than six months now bankers have been talking of how the project pipeline is nearly empty. It?s likely, therefore, that with some exceptions, most of India Inc is in trouble. It’s early days yet but a further earnings downgrade?from the current estimate of R1,300 or so for the Sensex for FY14?can?t be ruled out.