BOMBAY, 20 August — “We have no time to stand and stare”. These famous lines of poetry by William Wordsworth often come to mind, reminding us that there is more to life than just running. We should take a breath once in a while and stare at all that is there. So on this note, it would not be inappropriate to say that it is once again that time of the year when one sits down for a while and takes a long and hard look at all that has happened till now. It is time to look inside, introspect and then make certain conclusions for the future, some guidelines and then once again move ahead.
Right now we take a long and hard look at the Indian corporate world, look at the first quarter performances and based on that, chalk out the future.
The first quarter results are a good indication of what the future might hold for the companies and also for the investors. Most of the companies have declared their results and hence it is apt to make a progress card and find out where one stands.
Till date, 2,572 companies have declared their results for the quarter ended June 2001. Of this, 2,542 companies have a comparable quarter and show a rise of 13 percent in their bottom lines to Rs.106.21 billion. Sales stood at Rs.214.90 billion, recording a moderate rise of 6 percent. Other income witnessed a fall of 12 percent to Rs.31.37 billion. Profit before interest, depreciation and tax (PBIDT) show a rise of 9 percent to Rs.486.81 billion. Interest costs moved up by 8 percent to Rs.260.33 billion, while depreciation costs fell by meager 0.5 percent to Rs.80.03 billion. Thus, profit before tax (PBT) recorded a rise of 15 percent to Rs.146.45 billion. Tax provision (including deferred tax) spurted 23 percent to Rs.40.24 billion.
One important trend which came to the fore was that larger companies have managed to report better growth rates than the medium-sized ones, who have in turn reported better performances than smaller ones. And the smaller companies have reported higher losses. What this indicates is that the bigger fishes will eat away the smaller ones and very soon, the small companies will have to either merge with larger ones or simply shut shop. Companies like Grasim, Reliance, State Bank of India and Dr Reddy’s Laboratories reported much better than expected results. On the other hand companies like NIIT, Aptech, Bhel, Tisco, Glaxo and Mahindra & Mahindra reported shocking results which were far below analysts’ expectations.
Among the notable companies that posted bumper growth in net profit include PNB Gilts, e-Serve International (formerly Citicorp Securities), Aksh Optifibre and Chettinad Cement.
Significant turnaround cases include Tata Chemicals, ACC, Zuari Industries, Orient Paper and Birla Corp.
Notable worst performers are Salora International, Haldyn Glass, Ajanta Pharma, Aptech and NIIT. The companies that went into the red during the quarter include Essar Steel, Jindal Vijaynagar Steel, Bhel, M & M and IFCI. In terms of industry wise performance, the Indian cement sector was the top performer. Despite the poor off take, the companies have managed to show a good performance due to higher cement prices. And higher prices were possible mainly on account of lack of competition from imports.
On the other hand, all other complimentary inputs such as steel, aluminum, copper, etc., are facing a severe slowdown in terms of prices as well as volume as they have to fix their prices in tune with international prices. The second position in terms of performance was by the alkali/soda ash which posted a strong turnaround. Increase in domestic prices due to anti-dumping duty imposed on imports from China provided them short-term relief.
But for the coming months things do not look too optimistic the industry is now facing renewed threat of imports from other countries, especially after lowering of import duty in the last budget.
Shipping industry also fared very well during the quarter due to the business secured in firmer markets in the early part of calendar year 2001, whose positive impact was felt in the June quarter.
But for the coming months, the sail is not expected to be too smooth. Surprisingly, most of the public sector banks did very well in spite of the economic slowdown.
Except a few weak banks, private sector banks also fared well. Growing exports of formulations and generics have helped most of the leading Indian pharma companies to post encouraging results. However, the slowdown in the domestic market has taken bottom out of MNC pharma companies whose only focus is the Indian market. While large software exporting companies continued to post strong results, smaller and medium ones have been engulfed by the US slowdown.
In fact, all the companies in the computer education business, which have till now reported the results, have shown over 90 percent fall in net profit.
Automobiles and its ancillaries continued to be in reverse gear as demand failed to pick up even after the great slump witnessed last year.
For the coming months, despite the good monsoon and the falling interest rates, no major upsides are expected as demand in rural areas is expected to remain low. So celebrations for atleast the first half of the current year. And then fingers crossed for the entire fiscal!
