The earnings season has got off to a sedate start with the early birds posting numbers just about in line with expectations. Net sales for a set of 230 companies (including banks and financials) have risen by 6% year-on-year.
With expenditure reined in, the operating profit margins for the sample expanded by 177 basis points year-on-year (y-o-y), driving up operating profits by a strong 13%.
Heavyweight Reliance Industries’ Ebitda (earnings before interest, tax, depreciation and amortisation) was up a strong 15%. However, net profits for the universe were up just 8%, partly because other income was lower.
Notably, the top line growth for a sample of 59 banks and financials has been flat. However, smaller provisions and better trading incomes have helped them post a rise in profits in line with estimates. HDFC Bank reported an impressive 19% increase in loan growth while ICICI Bank’s domestic loan portfolio grew by 10.6% y-o-y.
It was a reasonably good quarter for the information technology pack with most companies reporting good deal wins and comforting management commentary. Both TCS and Infosys’ revenues were a shade better than expectations and both bagged a good number of deals. The depreciation in the currency aided the results.
RIL posted 10% rise in its top line while revenues at Ultratech went up by 21%, backed by a 7% increase in volumes.
At Nestle, domestic revenues were up by nearly 11% on the back of a high single-digit volume growth. At Ceat, revenues grew a strong 14%, driven by a big jump in volumes and also better price realisations. However, revenues of Hindustan Zinc were up by just about 4% y-o-y as production volumes were weak. Again, Avenue Supermarts’ same store sale growth deteriorated to 6.8% y-o-y in the September quarter from 7.1%y-o-y in the previous quarter.
The mid-quarter announcement of cuts in the Goods and Services Tax (GST) rates meant consumers put purchases on hold. Nevertheless, the lower rates, in an early festive season, seem to have created some demand. At companies like Dixon Technologies, revenues were up by nearly 30% on the back of brisk sales post the rate cuts.
Again, inflation in some commodities impacted margins for some businesses while driving up revenues for manufacturers of these products. The raw materials bill, for the sample of companies under study, was up by 60 bps, impacting gross margins for some. At Nestle, for instance, the gross margins for the quarter contracted by 230 bps y-o-y while the Ebitda margin contracted by 100 bps.
The heavy monsoon disrupted businesses in several parts of the country. The management at Dalmia Bharat, for instance, indicated that demand had been soft due to the rains. Rallis’ revenues too were badly impacted by the prolonged rains.
Online sales, however, have seen a big jump. Metro Brands saw a near 40% jump in online sales during the quarter, which helped it deliver an 11% revenue growth.