The Hindu Business Line : India Inc posts robust profit growth — Good tidings for steel, banks, textiles, auto

IT has been the second successive year of robust growth in profits for India Inc if the financial performance of the first 300 companies is any indication. Aggregate net sales and aggregate net profit of these companies have grown by 19 per cent and 37 per cent respectively.

In 2002-03, growth in sales and profits were 12 per cent and 53 per cent respectively. The total income of the 300 companies was about Rs 2,27,828 crore and net profits was Rs 22,766 crore.

Growth in earnings at the operating level has been only about 16 per cent with operating margins staying flat. Depreciation costs increased by 6 per cent, although corporate taxes surged by 47 per cent. However, the 16 per cent operating profit growth, swelled to 37 per cent at the net level primarily because of a 15 per cent fall in interest costs.

In terms of sectors, it was good tidings for companies that operate in textiles, banks, steel, pharma, oil & gas, engineering and auto ancillary segments. Continuing their ride on the retail boom, several banks witnessed robust growth in earnings. For steel companies, the sharp spurge in steel prices during the last one year, appears to have done the trick. For companies such as Man Industries and Bajaj Steel, the net profit has grown over 100 per cent.

Secondary steel manufacturers such as Mahindra Ugine and Asil Industries moved from red to black. Net profit of several companies that operate in telecom, media, hotels and chemicals sector, however, registered a sharp decline. It was a case of mixed bag for companies in the IT and consumer products segment.

The aggregate net profit growth of 37 per cent is, however, misleading. The median growth rate for the 300 companies was only 21 per cent. The median growth indicates that half of the 300 companies recorded profit growth of 21 per cent or higher. Even this is good news for investors. This is because the median growth in profits in 2002-03 for a set of 1,000 companies was only about 10 per cent.

Perhaps, it is still early days yet. A number of Tata group companies, big wigs such as ONGC, SAIL, State Bank of India and a swathe of smaller companies are yet to announce their financial performance.

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