Financial Daily from THE HINDU group of publications
Sunday, Feb 06, 2005
Financial Daily from THE HINDU group of publications Sunday, Feb 06, 2005 |
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Trends Corporate - Performance Industry & Economy - Economy Larger firms post sizeable growth in profits — Results reflect fresh capacities going on stream Suresh Krishnamurthy
THE aggregate profits of 461 companies that are part of S&P CNX 500 index rose 21 per cent in the quarter ended December 2004. This is significantly lower than the 44-per-cent growth in the quarter ended December 2003. The lower growth rate is mainly due to lower profits reported by state-owned oil firms and banking firms. If we remove these 55 firms from the sample, growth in aggregate profits surges to 43 per cent, much closer to the 54-per-cent growth reported in the quarter ended December 2003. This growth is entirely due to the performance of larger companies in the sample. The aggregate profit growth of the top 100 companies in terms of sales (companies with sales of more than Rs 300 crore in the quarter) was about 50 per cent. In contrast, there is a sharp deceleration in profit growth of smaller firms. Smaller firms form the other 306 companies in the sample with net sales of less than Rs 300 crore. Aggregate profits of these companies have grown by only about 10 per cent. This is attributable to drop in `other income'. Smaller firms reported a 17-per-cent decline in other income and only a 13-per-cent growth in operating profit. Operating profit is the excess of net sales over total expenditure and excludes `other income'. Whereas, larger firms reported a 48-per-cent growth in `other income' and a 38-per-cent growth in operating profits. There is, however, evidence of an across-the-board improvement in economic activity. Both large and small firms have reported robust growth in sales. Aggregate sales growth of large and small firms has risen by 29 per cent and 17 per cent respectively. This is higher than the growth reported in quarter ended December 2003. In addition, depreciation and deferred taxes have also risen. Rising deferred taxes indicate that fresh capacities have gone on stream. Induction of such fresh capacities increases depreciation and deferred taxes while lowering taxes payable. This trend is evident in the case of both large and small firms. Large firms that reported sharp rise in profits include Gujarat State Fertilisers, Ispat Industries, Uttam Galva, Sesa Goa and Century Textiles. Small firms that reported sharp rise in profits include Shirpur Gold Refiners, Shree Rama Multi-Tech, Aztec Software, Vinyl Chemicals and Mastek.
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