Corporate India Reports Sluggish Q3 Growth

The doomsday predictors could well be sharpening their quills once the third quarter results from Corporate India started trickling in. The early trend suggested a deceleration in year-on-year revenues and profitability with some sequential stability in the operating margins.

However, experts hold the view that these results would not mirror the macroeconomic headwinds that began lashing Europe and North America some months ago. “For the real impact to be felt, we would have to wait at least one more quarter, though it would be foolish to suggest that all sectors would face an adverse impact,” says a market research consultant. 

A survey suggests that growth has moderated

Meanwhile, a report published by the ET says revenue of a select list of 240 companies  they tracked declared financial results that showed a seven-quarter low of 18% with net profits growing by a modest 0.8%, the slowest over the past nine quarters. And the key factors reported for low profits are higher interest rate expenses and depreciation costs. 

However, operating margins were up sequentially by 10 basis points to 20.7% over the quarter, a shift that could be ascribed to the thaw in commodity prices. Of course, even this number was lower in comparison to the 24.7% recorded exactly a year ago in the same quarter. Experts point to the post-pandemic sales in select sectors for this high number posted in FY2022. 

Manufacturing and Banking to the fore

Readers would recall that market researchers had indicated better performances from lending companies while those engaged in manufacturing could show a sequential improvement in operating profitability. This was due to the expected growth in loans and higher net interest margins with both metal and cement producers expecting robust growth due to the higher demand from the construction industry. 

Further, the overall growth patterns of the sample size referred to by ET was also influenced by the banking and finance companies that bolstered the growth in overall profits of the group. At the same time, India’s largest company by revenues and market capitalization, Reliance Industries, caused it to be dragged down. 

If one were to remove the banks and finance companies data from the sample size, it showed a drop of 7.3% in aggregate net profit while the revenue growth had contracted to 16.3% year on year. In fact, the banking and finance companies contributed close to a fifth (19.2%) of the total revenue recorded by the 240 companies and 32% of their profits. 

Reliance revenues grows, profits drop

And if one were to exclude Reliance Industries from the list, the profits went up by 5.5% while the revenue growth grew to 18%, indicating that the one company that has witnessed a strong impact of the slowdown is the Mukesh Ambani-owned conglomerate. Reliance’s consolidated net profits fell 13.3% year on year to Rs.17,806 crore while revenues grew by 15.3% to Rs.2.21 lakh crore for the December quarter. 

Overall, the companies representing banking and finance, IT industries and oil and gas sectors contributed more than three-fourth (76.3%)  of the total revenues of these companies.  They also accounted for 86.3% of their profits, though it must be said that over the next few weeks these numbers could change as more companies declare their results.