Had it not been for five specific sectors, India Inc would have posted a fall in profits for the March-ending quarter. According to a Business Standard study of 989 companies accounting for 52 percent of market capitalisation on the Bombay Stock Exchange, the net profit grew by a mere 2.7 percent year-on-year mainly due to a good showing by banking, cement, IT, pharmaceutical and fast-moving consumer goods companies.
Had it not been for these sectors, profits would have actually plunged by as much as 9.6 percent for the March quarter. Consumer goods companies managed to post good results due to consistent price hikes undertaken throughout the quarter and during the entire financial year. Sunil Duggal, CEO, Dabur India, told the newspaper that the strategy has been to take measured price hikes instead of passing the entire hike to consumers in one go.
Dipojjal Saha of Edelweiss pointed out that margins contracted 320 basis points as well from a year ago (100 basis points = 1 percentage point) as per companies within their coverage universe which have declared results so far.
The immediate future does not look good either. Input costs are likely to remain high as inflation continues to hover above 7 percent, which will keep margins under pressure.
With no interest rate cuts in sight, demand is also likely to be sluggish. Five sectors may have helped in the performance of India Inc in the March-ending quarter, but how long can they continue to do so?