Tata Steel and other companies help prop up India Inc Q3
Tata Steel, Jindal Stainless and JSW Steel — which have swung from a loss to a profit, and and a contraction in losses for others —SAIL, Uttam Galva — India Inc’s numbers for the three months to December 2016 appear robust. Else, the growth in top line for a sample of 1,232 firms, at 8.2% year-on-year isn’t much better than the 7% y-o-y reported for the September quarter or 7.6% y-o-y in June and March quarters. What has helped is the sharp improvement in costs with the ratio of raw materials to net sales rising by just 6 basis points y-o-y compared with increases of 61 bps, 47 bps and 82 bps in the three previous quarters. The control over costs has driven up the operating profit margin for the sample by a sharp 190 basis points and consequently net profits have jumped 28% y-o-y. Management commentary, across sectors, has been fairly subdued and while most of the damage from demonetisation may be over, a recovery could take another couple of quarters. The impact of demonetisation was seen in companies such as Hero Motocorp, where the operating profits fell 5% y-o-y as volumes dropped 13% y-o-y and revenues came off by 12% y-o-y. At Mahindra and Mahindra (M&M), net sales were flat with the auto segment reporting a 7% fall in revenues. Most FMCG firms saw sales grow at a slower pace in Q3FY17 due to the acute scarcity of cash. Hindustan Unilever for instance, saw volumes contract 4% in the quarter which resulted in flat revenues and lower operating profits. However, some players didn’t do as badly as feared—Maruti Suzuki for instance reported a 12% y-o-y rise in revenues thanks to a 34% jump in sales to government employees. Nevertheless, gross margins for the car maker came in lower than estimates as it handed out more discounts.
Tags : ALLIED