Early birds can’t catch worm, Q3 results tepid

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New Delhi | Updated: January 19, 2015 4:26:00 AM

Expectations were never high to begin with but with some of the early birds missing even the muted estimates of analysts...

Infosys, Infosys Q3, Infosys profitThe tech trio of Infosys, Tata Consultancy Services and Wipro did reasonably well given the global recovery isn’t gathering pace. (Reuters)

Expectations were never high to begin with but with some of the early birds missing even the muted estimates of analysts, the December quarter earnings season hasn’t got off to a great start.

The tech trio of Infosys, Tata Consultancy Services and Wipro did reasonably well given the global recovery isn’t gathering pace, though TCS’ numbers were a shade lower than estimates. But both Reliance Industries (RIL) and Bajaj Auto posted subdued profit numbers, lower than in Q3FY14. Moreover, the data from real estate companies doesn’t signal any major pick-up in consumer interest.

While RIL’s results were expected to be unimpressive given the steep slump in global prices of crude oil, the firm’s gross refining margin of $7.3 per barrel was disappointing. Bajaj Auto has been losing market share to the competition in a weak demand environment. In sum, revenues remain more elusive than ever, at a time when inflation is easing but consumers are cautious; for a sample of 58 companies (excluding banks and financials) revenues have dropped just over 12%, year-on-year, primarily driven down by lower revenues at RIL which fell 22.5% year-on-year. And although, it’s early days yet, from housing to two wheelers, there don’t seem to be too many takers.

Infosys, Tata Consultancy Services, Wipro, Reliance Industries, Bajaj Auto

To be sure, expenses have been reined in — down 14.5% year-on-year — with softer prices of commodities helping bring down the ratio of raw materials to sales by a sharp 840 basis points year-on-year. That has helped push up operating profit margins by a good 220 basis points to over 16%, but operating profits have remained virtually flat.

If net profits for the sample have risen 5%, it is because other income has increased by as much as 24%.

While lenders such as Axis Bank have reported fairly good increases in loan growth, both to the corporate and retail sectors, it is not immediately clear if this is fresh demand or companies are transferring their outstandings in search of lower interest rates. Some lenders like

Federal Bank have delivered a very modest set of numbers driven by treasury profits. However, IndusInd Bank posted a good growth in loans to commercial vehicles.

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