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'India Inc may witness fall in profitability in Q1'

business Updated: Jul 10, 2008 17:35 IST
India Inc may witness fall in profitability in Q1: analysts

A robust growth in revenue notwithstanding, analysts are sceptical about the first report card of India Inc in the current fiscal and expect the continuing cost pressures to lead to a fall in their first quarter profitability.

"Our numbers suggest that growth should remain robust with 27 per cent year-on-year sales growth, but at the increasing cost of profitability," global financial major Citigroup said in an equity research report on the Q1 prospects for the Indian companies.

The mix of the growth with falling profitability is expected to be witnessed for the sixth quarter this time, the report said.

"We expect first quarter FY'09 ex-oil profit growth at 10.7 per cent for the Sensex firms and 8.7 per cent for the larger Citi India universe (155 companies), excluding oil," the company added.

Quarter growth has continued easing since 49 per cent growth in the third quarter of fiscal year 2006-07, and will touch 10.7 per cent in the Q1 of this fiscal, marginally lower than the 12 per cent in the last quarter of 2007-08, it added.

IT major Infosys is scheduled to kick start the earnings session tomorrow with the announcement of its first quarter results.

On the other hand, domestic brokerage firm Prabhudas Lilladher expects revenue of companies under its coverage to grow at 33.3 per cent year-on year in the first quarter, while net profit is likely to increase 10.5 per cent in the quarter.

"There are several competing pressures on margins during the quarter, on one hand rising raw material prices will take a toll on margins of industrial companies, on the other a sharply depreciated INR will save the day for technology companies to some extent, " Prabhudas Lilladher analyst Apurva Shah said in the report.