NEW DELHI: Corporate India is on the path to recovery.
A global slowdown, along with muted growth back home leading to tepid demand, had left a hole in the balance sheets of Indian companies in the past few quarters.
However, an analysis of 2,217 companies that have declared their fourth-quarter results so far show a 10.3% rise in revenue and 23% increase in net profit, compared to the year-ago period.
The list excludes 575 companies in banking and oil and gas sectors. Including them, corporate India saw a 5.5% growth in revenue during January-March, and a 26% fall in net profit, against the same period last year.
Banks have been reeling under a severe crisis, hit by rising non-performing assets (NPAs). For the overall banking, financial services and insurance (BFSI) sector, net profit fell 115% during the fourth quarter. Twenty seven listed public sector banks posted combined losses of `23,500 crore, due to high provisioning on the RBI’s directive to clean up their bad-loan books.
Oil and gas, under stress due to lower crude oil prices, has also been a drag. Oil prices fell 50% in 2015-16. Companies in the sector saw their revenue and net profit decline 12% and 19%, respectively.
Of the sectoral leaders, automobiles topped the chart with 17% growth in revenue and 54% rise in net profit. Other top performers include information technology & information technology-enabled services (IT&ITES) and pharmaceuticals & healthcare, with 16% rise in both revenue and net profit.
A reduction in expenses, aided by a fall in commodity prices boosted consumption-related sectors like auto and auto ancillaries. The government’s thrust on infrastructure and reforms in the power sector, and a substantial rise in other incomes for companies— gains from sale of assets, interest and dividend income — also aided revenue growth.
“We are beginning to see some green shoots, with fundamentals of a number of sectors starting to improve, particularly in the background of the GDP growth figures announced recently. Going forward, recovery in rural demand on the back of a normal monsoon should drive earnings growth. However, any supply shocks for commodities and damages arising from asset-quality woes of banks should be monitored closely,” said Prasad Koparkar, senior director, CRISIL Research.