Signs of green shoots in economy but damage already done; companies’ profits fall severely in Q3

By: |
Published: February 18, 2020 5:28:38 PM

Companies related to housing finance, shipping, sugar, non-banking finance companies, retail, and private banks have recorded a growth in double digits in Q3 FY20.

companies' profit, profit in Q3, firms' profit, slowdown blues, indian economyThe number of industries that have recorded growth in net sales has almost halved in the third quarter of the current fiscal, compared to the same period a year ago.

Even as the green shoots of economic revival have started to show their signs, the damage done by the prolonged slowdown may take some time to clear its mark. Despite the cut in tax rates, higher interest expenses and depreciation have resulted in the weak performance of all the companies, with contraction in top-line and moderation in net profit growth. The number of industries that have recorded growth in net sales has almost halved in the third quarter of the current fiscal, compared to the same period a year ago. In terms of net profits, industries earning positive bottom-line have also seen a notable decline, said a report by Care Ratings.

The corporate results analysed for a sample of around 2,200 companies shows that excluding banks and finance companies, the overall performance is weak as both net sales and net profits have contracted. Major industries that recorded contraction in the third quarter include refineries, auto ancillary, electronic components, oil exploration, steel and iron products, and non-ferrous metals. Businesses of trucks, telecom – service provider, electric equipment, aluminium products, and paper have also seen a shift from net profits in Q3 FY19 to net losses in Q3 FY20.

Also Read: As India becomes fifth largest economy, here’s how real is real growth

On the brighter side, housing finance, shipping, sugar, non-banking finance companies, retail, and private banks have recorded a growth in double digits in the same duration. The non-performing assets (NPAs) for a set of 36 banks (excluding small banks) stood at 9.12 per cent by the end of December 2019, which has moderated in the last two quarters. Meanwhile, the Centre for Monitoring Indian Economy (CMIE) data shows the net profit of non-financial companies in the three quarters of the current fiscal stood at -9.6 per cent in Q1, -15.8 per cent in Q2, and -13.4 per cent in Q3.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Next Stories
1Modi government mulls increasing scrutiny on FDI inflows in sectors crucial to national security
2UP Budget 2020-21 HIGHLIGHTS: Yogi Adityanath-led govt presents Rs 5 lakh crore budget; check details
3Finance Commission sets up group under ITC chief Puri on farm exports