The Hindu Business Line : Buoyancy in profit growth continues for corporates

THE story of buoyancy in profit growth continued for the corporate sector in the quarter ended September 2004. In aggregate terms, reported after-tax profits of 350 companies increased by 32 per cent. These 350 companies, including banks, accounted for about 25 per cent of the total market capitalisation of listed stocks.

After adjusting for extraordinary items, growth in aggregate profits was about 26.5 per cent. Growth in profits of the corporate sector, excluding banks, was even more robust (see table).

The growth numbers compare favourably with the growth reported for the same quarter in the previous year. There is, however, a substantial difference. In the quarter ended September 2003, declining interest costs largely fuelled profit growth.

For September 2004, robust sales growth is mainly behind the surging profits. In the period, 169 companies in the sample reported sales growth of more than 20 per cent. Interest costs continued to decline although by a smaller proportion. Depreciation is still rising only modestly at less than 10 per cent boosting profit growth in the process.

Prominent companies that reported growth in profits of more than 100 per cent include EID Parry, Gujarat Ambuja Cements, Bata India, Chennai Petroleum and Aventis Pharma. Many companies from shipping, cement, castings & forgings, steel and computer software sectors reported healthy growth in profits. Prominent companies that reported sharp decline in profits include Asian Hotels, IBP, Orchid Chemicals, Tamilnadu Newsprint and Carborundum Universal. Companies from industries such as fertilisers, petrochemicals, bulk-drug producers reported decline in profits.