Input, interest costs dent Indian firms' Q4 scorecard
High input and interest costs ate into the profits of Indian companies, as the net profit of 140 firms (part of the BSE 500) that have announced their results, grew by 17.8% year-on-year for the quarter ended March. Sandeep Singh reports. Numbers under pressureUpdated: May 03, 2011 01:44 IST
High input and interest costs ate into the profits of Indian companies, as the net profit of 140 firms (part of the BSE 500) that have announced their results, grew by 17.8% year-on-year for the quarter ended March.
Revenues grew by 24.3% during the same period.
The figures were in line with expectations as brokerage houses had projected a below-20% growth in net profits and an-above 20% growth in revenues for companies in the fourth quarter of 2010-11.The impact of raw material and interest costs was more severe on mid-cap and small-cap companies that posted weak profit growth compared to their large-cap peers.
Large-cap companies (see table) saw their profits grow by 19.9% and revenues by 25.4%. Mid-cap companies, however, witnessed a profit growth of 7.8% against a revenue growth of 28.8%.
Small-cap firms that saw their profits grow by 4.9% on a revenue growth of 9.7% were the worst hit.
According to experts, since small-and mid-cap firms do not command a high pricing power, a rise in input cost and interest rates hits their margins most.
"The results are on expected lines and pressure on profit margins was expected. Large-caps have better pricing power and ability to absorb salary cost, input cost and interest rate cost in a more effective manner," said Alex Mathews, research head, Geojit BNP Paribas Financial Services.
On the sectoral front, banking and IT companies shined and their aggregate profits grew by 28.2% and 28.7% respectively.
While the banking sector witnessed a strong performance both from the private sector and public sector, software giant TCS led the IT sector scorecard.
On the other hand, cement and capital goods sector witnessed negative growth in profits.
While the cement sector saw a de growth of 14% in net profit, the capital goods sector posted a negative growth of 4.6% in net profit.