Profits of 121 of 500 companies that make up the BSE 500 index shot up 30.4 per cent year-on-year in quarterly results announced until last Friday, indicating a robust profit season in India Inc, but an overall revenue growth of just 1 per cent raised questions on the sustainability of growth.
A demand crunch overhang persisted in revenues, but analysts expect better days ahead. However, revenue growth was high in some sectors.
Profits rose to Rs 20,138 crore in the quarter ended September 2009 from Rs 15,567 crore in the same quarter for the 121 firms.
Nilesh Shah, chief investment officer at ICICI Prudential, said softer raw material prices and excise duty cuts boosted profit margins.
“As input prices softened the output prices went down and also the volume growth did not occur, thus resulting in flat revenue growth,” added Aseem Dhru, CEO, HDFC Securities.
“The most important fact is that the topline is not growing and they will have to concentrate on growing their topline in the third and fourth quarters,” said Amitabh Chakraborty, president, equities, at Religare Enterprises.
But experts do see a surge ahead. “The IIP (index of industrial production) numbers are good and demand is growing and this raises my confidence,” said Sudip Bandyopadhyay, MD, Reliance Money.