Strong Q1 seen for India Inc, but input costs may bite

Indian companies are expected to post strong revenue growth in the April-June quarter results for 2010-11. While advance tax collections show a robust undercurrent, analysts say profit growth may lag toplines as rising raw material costs cast their influence. Healthy signs

Though the economic recovery in the US and Europe still hangs fire, India Inc seems to be weathering the climate well. Indian companies are expected to post strong revenue growth in the April-June quarter results for 2010-11.

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While advance tax collections show a robust undercurrent, analysts say profit growth may lag toplines as rising raw material costs cast their influence.

“The advance tax numbers rose by over 20 per cent and with the exception of a few, most of the large companies have posted strong numbers that show that there would be a healthy growth in revenue and profit,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services.

The last quarter of 2009-10 suggested that recovery was well under way. The BSE 500 list of companies showed 24 per cent year-on-year growth in revenues and a 6.7 per cent growth in bottomlines, and research houses expect the trend to continue.

“Interest rates continue to remain low. However, operating margins could be flat to down in most cases as most commodity prices are higher…,” HDFC Securities said in a research report.

Analysts expect healthy growth in the automobile, information technology and banking sectors. “The automobile sector has come out with strong sales figures during the quarter and that reflects good growth for the sector,” said the head of a mutual fund who did not wish to be identified.