An analysis of 914 companies that have a market cap of Rs 50 crore and more that have announced their results for the quarter ended December 2009 shows that the strong growth of India Inc is only getting stronger. On revenue gains of 11 per cent, profits have jumped by 43 per cent.
And leading the growth brigade are not the mega-caps but small companies that have seen their profits rise by an unprecedented 35 times. Understandable, given that small companies have a lower base to grow from. Mid caps comes next, rising 131 per cent.
In absolute terms the profit share of large cap companies has shrunk from 87 per cent in December 2008 to 74 per cent in December 2009. The share of mid caps has gone up from 13 per cent to 21 per cent and for small caps it has risen from less than 1 per cent to almost 6 per cent.
“In small and mid caps the equity portion is low and so resistance against volatility is low on both profits and loss side,” Anup Bagchi, executive director, ICICI Securities. “Their operating leverage is high and a small rise in topline leads to multiple growth in profits.”
The 578 companies that have a market capitalisation of between Rs 50 crore and Rs 1,000 crore, saw their combined profit shoot from a low of Rs 104 crore in December 2008 to Rs 3,818 crore in the quarter ended December 2009. The revenues though grew by only 15 per cent.
The slowdown in the financial year 2008-09 impacted the smaller companies the most and 170 of the 578 companies booked losses in the quarter ended December 2008. However, most of these companies (130) turned into profit-making entities in the quarter ended December 2009, leading to a big surge in their bottomline.
With a market capitalisation of between Rs 1,000 crore and Rs 10,000 crore, mid-sized companies follow next, with an almost flat revenue growth of 6.8 per cent delivering a 131 per cent growth in profits.
The 83 large companies that have market capitalisation in excess of Rs 10,000 crore have registered the slowest growth numbers. The aggregate growth in the revenues and profits for the segment stood at 12.5 per cent and 20.4 per cent respectively. The strong revenue growth numbers have been skewed by the high 90 per cent growth in the revenues of Reliance Industries.