After twenty quarters of sustained double digit growth in earnings, India Inc might be in for a pause. A study by FE reveals that the first quarter net profit of 171 companies increased by 9% to Rs 9,184 crore during April to Jun 2008 from the level of Rs 8,426 crore during April to June 2007.
And while may of the big wigs will be declaring their results in the coming week, the first signs of earnings growth slowing down are clearly visible. “This is something that the stock market and analysts have already factored in, while making valuation calculations,” says a fund manager with a leading Indian fund house. He reckons that while overall lower numbers are in the market, there would definitely be individual company shocks.
Moreover, even the 9%, for the early-birds is thanks to some stellar performances by mid-sized diversified companies like Sintex Industries, Rallis India ,Max India and ICI. And there have been those who have gained from strong steel and steel input prices like Sunflag Iron & Steel and PSL.
However, there are others, who reckon that the earnings growth, though low, will not be as bad as many are expecting them to be, especially in the first quarter. The impact of higher interest rates and slowing economy will be reflected in the quarters ahead.
Results in the banking sector, which is being seen as the one that would be the worst hit, has actually seen the net profit growth being robust, will be watched more closely in the weeks ahead. Amongst the early results, Axis Bank and South Indian Bank, have shown strong growth, despite the former making a provision of Rs 225 crore.