Some fears that observers, analysts had about corporate India?s earnings performance may be assuaged. Apprehensions that a slowdown in economic activity, high input costs and huge derivative losses would take a toll on India Inc?s earnings might come a cropper as a study carried out by FE on 724 companies for FY08 shows net profit for these companies grew a whopping 31.43% over the previous year while revenue growth was at 23.55%.
Voicing his excitement over these numbers, Nilesh Shah, CIO, ICICI Prudential said, ?The FY08 results have come ahead of investor?s expectations. The guidance also seems to be ahead of expectations. This probably helped stock markets to recover in the days to come.?
Analysts had remained uncertain over the fate of the earnings growth and many had reworked lower numbers.
Now, with the earnings scare fading away, analysts would well be reworking their estimates and this will be reflected in a stronger market position.
However, some concerns exist about the quality of earnings. A large portion of the earnings has come from the ?other-income? or non-core earnings. Other income increased 47.50 % to Rs 50,988 crore in FY08 from Rs 34,568 crore in FY07. A large part of the other income has been sourced from gains made through trading in equities and sale of assets, and this is usually not sustainable.
Amongst the 724 companies, heavyweights such as Reliance Industries, ICICI Bank, and Bharti Airtel have done exceptionally well and pulled the numbers.
The Sensex bigwig and India largest company Reliance Industries? net profit increased 62.92% to Rs 19,458 crore in FY08 from Rs 11,943 crore during FY07. Sales of the company rose 19.47% during the same period and other income of the company increased significantly by 1077.41% to Rs 5,628 crore FY08.