With the results for a few large companies such as Tata Motors and Tata Steel yet to be announced, it?s clear from the number so far that India Inc hasn?t acquitted itself too well in the June 2010 quarter. The misses far outnumber the hits, leaving analysts with little choice but to downgrade earnings estimates. Bank of America Merill Lynch observed in a report earlier this week that the results had reinforced its view that earnings were likely to see downgrades in the near term. ?We expect the Sensex earnings for 2010-11 to be downgraded to Rs 1,000, a growth of under 25%, as against the consensus growth estimates of over 30% at the start of the results season,? it said.

That process seems to have begun with several brokerages lowering the earnings estimate for the Sensex by 2-2.5% for 2010-11.

A sample of 1,519 companies (excluding banks, financial institutions and oil firms), showed a reasonably good rise in net sales, at 23% year on year, which does not compare too badly with the 30% year-on-year growth seen in the three months to March 2010. However, very little of the top line actually flowed into the bottom line this time around ; net profits were up barely 11% up year on year. That?s way below the increase in profits of nearly 41% year on year seen in the March 2010 quarter. The culprit: higher expenses primarily on raw materials. The operating profit margin for the sample contracted 340 basis points, to 17.5%, leaving the operating profit higher by just 3%.

>An IIFL reports observes that overall results have been below expectations. ?Earnings for autos, capital goods, cement, energy, real estate and utilities? came in below our estimates, the report said. Indeed, Hero Honda quite shocked the Street with a 300-bps y-o-y drop in margins, and while it seemed that Mahindra & Mahindra had posted a smart 40% increase in net profits, they were driven to some extent by lower other expenses and taxes and higher other income. In the capital goods space, engineering major Larsen & Toubro turned in a rather anaemic 6.4% growth in its top line. ?The misses in the domestic cyclical sectors such as autos and capital goods reflect competitive or supply-side issues rather than a slackening of demand,? observed IIFL.

That?s probably true for some other spaces too. That the demand for consumer goods remains robust is evident from Asian Paints? domestic sales numbers, which rose a better-than-expected 28%, albeit some of it due to the rush on the part of dealers to stock up ahead of an anticipated price rise. But clearly, not everyone has the pricing power; Hindustan Unilever?s bottom line actually fell although revenues were up 7% while Tata Global Beverages missed stand-alone earnings estimates by about 20% because it couldn?t pass on the higher costs; its operating margins came off by a steep 400 basis points to 11.6%.

As Citigroup observes, both top line and operating margins are hurting profits, though margins appear to be more vulnerable right now. Overall, growth is moderating; the latest IIP number for May 2010 came in at just 11.5%, way below the 16%-plus figure for April while the core sector index grew at just 3.6% in June, the lowest growth in the last 10 months.

Should commodity prices and inflation not abate and interest rates move up sharply, it?s possible India Inc will not do too well in the coming quarters too.