The industry league

Written by Pradip Kumar Dey | Updated: May 24 2008, 06:56am hrs
Among the industries (80) studied, only one showed negative growth in their total income during 2006-07. Mention may be made of transport-airlines/travel agencies (-18.73%).

All the other 79 broad industry categories under which the FE 500 had been clubbed had positive growth to show.

Aggregates tend to conceal some real good or bad performances. Thus, even though mining/minerals/metals showed good income growth of 50.54%, Sterlite Inds grew at the higher rate of 57.56%.

The group average was also weighed up by the 112.14% income increase reported by Hindustan Zinc. The net profit of the group also increased by 50.70% during 2006-07.

Similarly, the electronic-consumer industry saw 51.89% income growth. But at least two electronic-consumer companies; namely Videocon Inds and Salora Internationalreported more than 50% increases. The net profit of the electronic-consumer group of companies increased by 118.41% to Rs 871.32 crore during 2006-07.

Among the industries studied, the best performers of the year were construction, aluminium and products, computersoftware mega, pharmaceutical-Indian-Formulations and cement. The details of industry performance appear in the tables starting from page 66. Given below is a brief synopsis of the major gainers and losers of 2006-07.

Construction: The industry showed excellent results with positive growth rates in all financial indicators. While total income increased by around 53.08%, net profit went up by 74.52%. And the retained profit of the group increased by 55.47% to Rs 2879.97 crore during 2006-07. And the debt-equity ratio increased from 1.30 during 2005-06 to 1.47 during 2006-07. Unitech, Subhash Projects, Era Constructions, Ansal Prop & Infra, and Gammon (I) were among the best performers.

According to industry sources, Indias planned infrastructure spend of Rs 12.7 trillion is likely to be funded through a public-private mix.

The total investment in Indian infrastructure is estimated at $284 billion over the next five years. As a result, investment in infrastructure is expected to rise from 4.5% of the GDP to 8% by 2012.

Aluminium & Products: This industry reported significant growth in almost all financial indicators, with a net profit (NP) growth of 55.32% during the year 2006-07. The retained profit of this group also increased by 61.7% to Rs 4485.91 crore during 2006-07. The stars in the category were Madras Aluminium (117.1% growth in NP) and Hindalco (I) (54.89%). The debt-equity ratio of the group increased from 0.32 during 2005-06 to 0.37 during 2006-07.

The domestic aluminium industry has grown by only 7% during FY07, against the corresponding growth of over 20% during FY06. The subdued growth during the year was mainly on account of lower demand from the electrical sector. Against the 23% growth in aluminium consumption in this sector during FY06, the consumption growth was only around 7% during FY07.

Diamond Cutting/Jewellery: This industry reported significant growth in almost all financial indicators, with a net profit (NP) growth of 47% during the year 2006-07. The retained profit of this group also increased by 50.47% to Rs 318.10 crore during 2006-07. Shrenuj & Co, Gitanjali Gems, Su-Raj Diamonds and Rajesh Exports did well during the year. The better performance of Shrenuj & Co is reflected in the net profit growth of 70.64% during 2006-07. The retained profit of the company also increased by 81.58% to Rs 25.04 crore during 2006-07.

The gem and jewellery sector recorded an increase of 2.74% in exports at $17.1 billion in the year 2006-07, as compared to $16.6 billion in the previous fiscal. While the US accounts for 31% of industrys gem and jewellery exports, other markets like Japan and CIS nations, including African countries are being explored by the industry.

Cement: The cement industry performed better during 2006-07, with the total income of 16 major cement companies increasing by just 43.87% and net profit increasing by 158.77%. The improved profitability of the cement companies during the year 2006-07 has been due to improved prices, cost control, and higher demand in the international markets. This is reflected in the performance of Dalmia Cements (Bharat), whose net profit increased by 169.81% during 2006-07. The retained profit of the company also increased by 179.94% to Rs 216.11 crore during 2006-07. The cement industry witnessed a significant growth of 11.3% in the calendar year 2006 against 9.4% in 2005. During the year, most cement companies operated at high capacity utilisation levels to meet increasing demand.

Automobiles-LCVs/HCVs/ Passenger Cars: The industrys (7 units) total income increased by 26.62% and net profit increased by 24.43% during the year 2006-07.

Ashok Leyland, Tata Motors, Eicher Motors, and Maruti Suzuki experienced a moderate increase in total income during the year 2006-07. Among these four companies, minimum income growth (17.27%) was seen in the case of Maruti Suzuki.

The buoyancy in the economy, growing consumer aspiration in urban India, and a flurry of new products provided a strong foundation for growth of the auto industry in the year 2006-07. For the first time, the auto industry collectively crossed the milestone of more than 10 million vehicles a year in domestic sales. The passenger car industry grew by about 22%, the fifth successive year of significant growth. Fiscal 2007-08 marks the beginning of the eleventh five year plan, which targets the average annual growth rate of 9%, as compared to 7.6% achieved in the tenth five year plan.

Software: The aggregate total income of the industry (7 units) increased by 39.46% to Rs 57,630 crore in 2006-07. The net profit of the industry showed an increase of 40.33% during the year under study and the retained profit of the industry also increased by 64.93% during the year 2006-07. Infosys Technologies, HCL Technologies, TCS, and Wipro were among the star performers. The net profit of HCL Technologies and Infosys Technologies increased by 72.60% and 56.26% respectively during the year.

The domestic IT market is coming into its own and witnessing a high degree of merger and acquisitions activity, involving some of the key players in the market. Increasing IT usage and adoption within the country is enhancing competitiveness of the Indian economy and the user community.

Pharmaceuticals (Indian) Bulk Drugs & Formulations: The industry has performed somewhat better in 2006-07, with aggregate total income rising by 26.25% to Rs 24,182.74 crore during 2006-07. Net profit and retained profit increased by percent and 96.24% respectively during the same period. Companies like

Dr Reddys Laboratories, Aurobindo Pharma, Glenmark Pharma, and Ipca Laboratories did well during the year. The debt-equity ratio of the group decreased from 0.57 in 2005-06 to 0.51 in 2006-07.

According to the directors report, the global pharmaceutical market audited sales grew by 7% (at constant exchange rates) to reach $608 billion in 2006. North America, Europe, and Japan continued to remain the key markets accounting for 87% of the worldwide pharmaceutical sales in 2006.

Telecommunications-Service Provider: The industry has performed well in 2006-07, with aggregate income rising by 38.84% to Rs 36,475 crore in 2006-07. Net profit and retained profit increased dramatically. Net profit of the group increased by 198.88% to Rs 5415.66 crore during 2006-07. Companies like Idea Cellular, Bharti Airtel, Tulip IT, Avaya Global Connect did well during the year. The net profit of Bharti Airtel increased by 100.45% to Rs 4,033.23 crore during 2006-07.

With rising income levels and favourable demographics (42% of the population is less than 20 years in age), India is poised to at least double its GDP in nominal terms from current levels by FY 2010. This era of rapid economic growth has been accompanied by an exponential growth in the telecom sector, particularly on the wireless side.