BOMBAY, 12 — The second quarter (Q2) results of almost all the Indian companies are out.
And now it is time to take stock of the future. We have already stepped into the third quarter and it is based on the performances of the Q2 that we will be able to conclude about the coming months — will they be good or bad? Everybody has been screaming their heads off saying that the Indian economy has slowed down , so was this reflected in the Q2 performances? Well, a slowdown has certainly been seen in corporate India’s Q2 results.
The consolidates sales of India Inc has taken a fall of less than 1 percent but the fall in net profits has been sharper with a 8 percent drop.
Companies like Dr Reddy’s Lab, Mahindra & Mahindra, Novartis India, GlaxoSmithKline Pharma, Bajaj Auto, Satyam Computers, Zee Telefilms, NIIT, Sun Pharma, Digital GlobalSoft and Tata power reported better than expected results. However, companies like ACC, Cipla, Hughes software and Larsen & Toubro disappointed the markets.
Among the notable companies that posted bumper growth in net profit include Tata Telecom, Alstom Power, Hindustan Construction, Philips India, BHEL, Dr Reddy’s Lab, Munjal Showa, Hindustan Inks, Excel Industries, CMC and Larsen & Toubro.
Notable worst performers are Bharat Hotels, National Aluminum, Saregama, Madras Cements, SSI, HFCL, Aptech and NIIT.
Companies which went into the red during the quarter outnumbers those which turned back to the profits. Companies which made profits in September 2000 quarter but made losses in September 2001 quarter numbers 229. These include Bongaigaon Refinery, Jindal Vijaynagar Steel, Essar Steel, Chennai Petroleum and Centurian Bank.
There are 141 companies which made losses in September 2000 quarter but reported profits for the September 2001 quarter. These include PNB Gilts, Saurashtra Cement, Hindustan Motors, IDBI Bank and ACC.
And now based on all these mind numbing details, comes the moot question — so what happens now? Well, the news is not all that reassuring. According to the 38th round of the Business Expectations Survey conducted by the National Council for Applied Economic Research, the Business Confidence Index (BCI) has fallen to 82.5 points for the quarter-ended October 2001, its lowest level in the last 24 months. The fall was attributed to the perception of a sluggish demand growth which is pushing back investment plans. Responses received after Sept. 11 show greater apprehension about the overall economic condition.
Overall though, as per the survey, firms do not anticipate any quick recovery. Expectations about growth in domestic sales over the next six months have declined for all sectors except consumer durables and services. Exports, raw material imports and pretax profits are expected to fall over the same period for all firms except for consumer durables.
The consumer durables sector is expected to buck the trend on account of the anticipated rise in consumer spending in the festival season and revival of rural demand.
The bad news doesn’t end there. The decline is across all sectors and regions with very few exemptions. Manufacturing and capital goods sector had already been doing badly and continues to be pessimistic. Services was the only sector which had been doing better till now and still nurses the hopes of an early rebound.
Based on these results, looking at the performance of India Inc in Q2, it would be right to say that the second half will be worse. While government’s disinvestment process is showing signs of a pick up, it is very doubtful that under current adverse economic conditions, the government will get worthwhile bids for most of the PSUs being offered. Infrastructure projects continue to languish. Another concern is that pick up in rural demand might be moderated by weak urban demand, poor stock market and falling interest rates.
And talking about the stock markets, it will also continue to suffer mainly from India’s largest mutual fund, Unit Trust of India, which will and continue to sell to meet the redemption pressures and also to remove all the excess flab. Moreover, following the Sept. 11 attacks, the weak global markets will also continue to have an impact. Afterall we all are now globally connected. One can only hope that FIIs will stay put at these low prices and will not go for their normal year-end profit booking to meet their redemption pressures.
In the coming months, though the demand for automobiles have started picking up and India having had a good monsoon, the ramifications of the Sept. 11 attacks are yet to be felt. And this is expected to be fully impacted in the third and fourth quarter of the current year. So fears of global recession and uncertainty do not bode too well for India in the coming months.