​​​
  1. India Inc results season: No recovery on horizon yet; top line growth subdued, other income boosts bottom line

India Inc results season: No recovery on horizon yet; top line growth subdued, other income boosts bottom line

The subdued tone of the management commentary at Larsen & Toubro (L&T) suggests the recovery in India may have been pushed back by at least six to eight months.

By: | New Delhi | Published: January 30, 2017 6:45 AM
Top lines were clearly under pressure; at Asian Paints, net operating revenues rose just 2% y-o-y while at TVS Motors they went up 3% y-o-y with a marginal increase in realisations. (Reuters) Top lines were clearly under pressure; at Asian Paints, net operating revenues rose just 2% y-o-y while at TVS Motors they went up 3% y-o-y with a marginal increase in realisations. (Reuters)

The subdued tone of the management commentary at Larsen & Toubro (L&T) suggests the recovery in India may have been pushed back by at least six to eight months. Chief Financial Officer R Shankar Raman said after the engineering firm announced results late last week he didn’t see the headwinds, that are holding back growth, subsiding anytime soon. L&T reported a dull set of numbers for the three months to December, 2016 with the top line staying flat and order inflows falling 10% y-o-y.

Indeed, demonetisation had an impact across most consumer-focussed companies — Hindustan Unilever for instance, saw volumes contract 4% in the quarter which resulted in flat revenues and lower operating profits.

However, some players didn’t do as badly as feared—Maruti Suzuki for instance reported a 12% y-o-y rise in revenues thanks to a 34% jump in sales to government employees. Nevertheless, gross margins for the car maker came in lower than estimates as it handed out more discounts.

Operating profit margins for a sample of 277 companies dropped by about 40 basis points as the increase in costs matched the rise in net sales. A big jump in other income boosted the bottom line by 9.5% y-o-y; shorn of this, net profits would have risen a meagre 2.25%. This was particularly true for Reliance Industries which reported weaker-than expected refining margins at $10.8 per barrel but posted a 33% jump in other income.

Top lines were clearly under pressure; at Asian Paints, net operating revenues rose just 2% y-o-y while at TVS Motors they went up 3% y-o-y with a marginal increase in realisations. The FMCG piece at ITC barely grew and margins for the firm dropped slightly to 26.1% for the three months to December although profits came in ahead of estimates. JSW Energy reported poor top line with a 29% y-o-y fall in revenues on the back of weak realisations, low capacity utilisation and a low share of merchant sales.

You May Also Want To Watch:

Indeed, business does not seem to be too brisk in an economy hurt by an acute shortage of cash-net sales at cement maker Ultra Tech barely grew. Moreover,

intense competitive pressures hurt firms like Bharti Airtel whose India wireless operating profits fell 16% sequentially.

With prices of raw materials on the rise, companies are clearly feeling the pinch. The ratio of inputs to net sales, for the sample, increased 122 basis y-o-y points in Q3FY17. That compares with a rise of just 22 basis points in Q2FY17 and a fall of 544 basis points and 431 basis points in Q1FY16 and Q4FY16, respectively.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Go to Top