Subsidiaries pip parent companies in third quarter

Written by Pradip Kumar Dey | Mumbai | Updated: Mar 3 2011, 04:04am hrs
After a stellar performance in the last three quarters, corporate India's financial results for the quarter ended December were much below the Street's expectations and sprung many surprises. The performance of India Inc's subsidiaries was better than their parent companies and both topline and bottomline were higher than the parent companies. Subsidiaries are separate, distinct legal entities for the purposes of taxation and regulation and the businesses are fully integrated within the main company. An FE analysis of 442 standalone and subsidiaries that have reported their consolidated results show that the net profit of subsidiaries rose a whopping 102% to Rs 11,681 crore during the three months to December 2010 as compared with Rs 5,781 crore during the same period in 2009. Net sales grew 24% to Rs 1.40 lakh crore. In contrast, the net sales of parent company grew by 15.3% to Rs 1.70 lakh crore during the quarter ended December last year.

Similarly, the operating profit of subsidiaries increased by 52% to Rs 27,701 crore during the quarter ended December last year. The operating profit margin of subsidiary companies increased by 369 basis points to 19.81% from 16.12% during the quarter ended December in 2009 despite the fact that the interest cost of the group increased by 64% to Rs 4,752 crore in the quarter ended December 2010 from Rs 2,896 crore during the same quarter in 2009. The top five companies according to subsidiaries sales in the quarter ended December were Tata Steel, Tata Motors, Bharti Airtel, Adani Enterprise and Grasim Industries. The highest growth in sales was registered in the case of Bharti Airtels 17 subsidiaries. The sales of the 17 subsidiaries of Bharti Airtel increased by 300% to Rs 4,976 crore during the quarter ended December last year from the level of 1,550 crore during the same quarter in 2009. The operating profit margin of the 17 subsidiaries of Bharti Airtel decreased by 21.12 percentage points to 28.81% during the quarter ended December 2010 as compared with 49.93% in the quarter ended December 2009.

On the other hand the top five companies in terms of subsidiaries operating profit were Tata Motors, Cairn India, Sterlite Industries, Bharti Airtel and Reliance Communications. Here the highest growth in subsidiaries operating profit was seen in the case of Cairn India.