India Inc’s Q4 profits suggest faster recovery
Net profit growth slumps, but better than expected
New Delhi, May 10
Corporate profits are down, but not out.
Against negative expectations of analysts in the previous quarter, the corporate profit growth for most leading companies has come out in the positive zone, strengthening the belief that a recovery could be faster than expected.
A look into the results of BSE 500 index companies reveals that the average net profit growth for the 210 companies that have disclosed their results for the last quarter stands at 0.8 per cent. While this is significantly lower than the 21 per cent that they witnessed in the same quarter a year ago, it is better than what was expected.
“The results are much better than expected and the trend is positive. We expected a quarter on quarter growth of 0.8 per cent for a set of companies but it has actually come out to be 4.8 per cent,” said Amitabh Chakraborty, president, equity, at Religare Enterprises.
“Better than expected results have also been one of the reasons that have held the markets together over the past one month,” said Chakraborty. A mood of recovery across the globe is fanning further optimism. Revenue growth for the same companies was 4 per cent against 24.2 per cent a year ago.
“We were all expecting a substantially low numbers or in fact negative growth numbers but that has not happened. We have positive numbers for majority of the companies,” said Alex Mathew, head of research at Geojit BNP Paribas Financial Services. “We expect a better result in one or two quarters down the line and a faster recovery.”
The pressure on the interest expenditure front for the companies softened during the quarter from 40 per cent in Q4 2007-08 but still stood at a high of 26 per cent in the latest quarter.
But margins are under stress. The same set of companies witnessed a growth of 2.3 per cent in net profit in the full year 2008-09 against 29.3 per cent for 2007-08. Average revenue growth was 19.3 per cent for the fiscal 2009 against 26.4 per cent in the previous year.