The Hindu Business Line : India Inc returns to profit growth in March quarter

Profit growth for Indian companies has picked up pace in the March quarter after year-on-year declines until December. The reported profits for 1200 NSE listed companies for t,he quarter ended March 2009 have grown 19.3 per cent when compared with the same period last year.

Sequentially, the companies have posted a 40 per cent growth in this quarter when compared with the December quarter. Profit growth was helped in good measure by companies adopting the AS 11 relaxations and taking write backs pertaining to the same. Expanding margins, as raw material costs fell, also helped profit growth.

The sales picture for the 1,200 companies was not very heartening, with sales remaining almost flat against last March and actually seeing a dip of 1.5 per cent, sequentially. That is not a good sign on demand and probably captures production cuts put in place by a few manufacturing companies. Falling raw material costs boosted operating profits by 19 per cent in the March 09 quarter against last year.

However, softening of interest rates is yet to show up in the financials of these companies. The interest costs are still higher by 30 per cent when compared with the same quarter last year.

Lower provisioning for taxes and revision of AS 11 has worked in concert to pump up the reported adjusted profit growth to 19.3 per cent.

Companies such as Siemens and Alstom Projects saw a turnaround compared with the same period last year, while BPCL saw a substantial jump in profits. Several companies saw their reported profits jump on adoption of the revised AS 11 provisions, Mahindra and Mahindra being a key example. The December quarter of 2008 saw the company post a meagre profit of Rs 1.2 crore (a 99 per cent year-on-year decline in profits) due to heavy forex losses. The revision of the accounting standard has helped it register substantially higher profits of Rs 418.07 crore.

On a sequential basis, companies in automobiles, metals, chemicals, capital goods and pharmaceuticals sectors were key ones to see improvement, though year-on-year numbers still remained poor for some of these sectors. On the other hand, companies in the IT, FMCG and media sectors saw a quarter-on-quarter slowing of profit growth.

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