Earnings trip on subdued demand

Written by fe Bureau | Mumbai | Updated: Oct 24 2014, 03:08am hrs
Going by the first crop of numbers from India Inc, the September quarter was a tough one, reports fe Bureau in Mumbai. Although the festive season set in earlier this year, the subdued numbers show consumer demand remains tepid; it was other income that helped Hero MotoCorps bottom line, otherwise the Ebitda of R930 crore was a shade below estimates with overheads eating into margins. Despite benefiting from the fall in prices of key commodities the ratio of raw material costs to sales for a sample of 202 companies dropped 318 basis points y-o-y to 52% operating profits have risen just 6.7% y-o-y. The star performer so far has been Idea Cellular with adjusted consolidated Ebitda growth of 25% y-o-y but a host of companies disappointed the Street including Cairn, Rallis and TCS. JSW Steel surprised analysts with a good set of numbers and a 20% y-o-y increase in Ebitda helped by lower raw material costs. While earnings should get a boost in the coming quarters as the full impact of the fall in commodity prices filters through and lower inflation boosts consumer demand, profits can rise meaningfully only once the capex cycle turns. With the government clearing projects quickly, that should happen soon.

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