Financial Daily from THE HINDU group of publications
Sunday, Sep 29, 2002

Investment World
Features
Stocks
Port Info
Archives

Group Sites

Investment World - Stocks
Markets - Recommendation


April-June for Nifty cos — Demand pick-up to the rescue

Sowmya Krishnan

IN the past few quarters, Corporate India had banked on cost-cutting and savings on interest costs to boost the bottomline.

A study of the performance of the 50 companies comprising the S&P CNX Nifty index indicates a slight improvement in demand, which trickled down to the bottomline. Since most of the benefits of cost-cutting have already been reflected in the last year's performance, India Inc. did not get much help from cost-cutting for the quarter, but interest costs continued to slide downwards.

This suggests that only a strong pick up in demand can sustain the profitability growth and enhance shareholder value in the coming quarters.

Sectoral performance

The topline pick up has been more evident in the automobile and pharma companies and in a few core sector companies such as ABB, Tata Power, Tata Steel and Larsen and Toubro.

The pharma and automobile sector posted 37 per cent and 25 per cent growth in turnover respectively, while the economically-sensitive companies recorded an aggregate growth of 6.13 per cent compared to negative growth recorded in 2002.

Tata Steel benefited from the firming up of steel prices, while higher turnover for ABB and Tata Power could indicate a slight pick up in the power sector.

Cement companies edged up marginally as poor realisations played spoilt sport despite higher volume off-take.

Surprisingly, the new economy companies represented by technology and telecom took a beating in the June 2002 quarter.

Topline edged up by a marginal 2.35 per cent and, at the net level, profitability declined by 19.7 per cent.

This was primarily due to a drop in sales for MTNL, VSNL and NIIT. Barring these, the sales for the rest of the tech stocks rose by 18 per cent. FMCG companies continued to reel under pressure. The aggregate turnover inched up by a mere 0.54 per cent.

Turnaround

At the net level, June 2002 quarter witnessed some companies turning into profits from losses in the corresponding previous period and vice-versa.

Tata Engineering, aided by better product mix, continuous efforts to prune down costs and higher realisations returned to profitability.

For Mahindra and Mahindra, the restructuring and downsizing efforts coupled with higher offtake of the company's automotive and farm equipment aided its return to profitability.

IPCL, which recently came under the Reliance fold, slipped into the red posting a loss of Rs 6 crore as against a profit of Rs 12.67 crore in the corresponding previous quarter.

Both sales and production in terms of volume declined. It might take some time for the change in ownership to bring in the desired effect.

Swings in profitability

Wipro recorded a 5 per cent decline in profitability for the quarter, while most other top-rung tech companies posted a two-digit growth.

BHEL pruned down its losses sharply from Rs 125 crore to 49 crore helped by a strong growth in the order-book position.

Fall in tourist arrivals and occupancy rates resulted in a 29 per cent drop in the turnover, which translated into an 83 per cent drop in net for Indian Hotels.

The merger of ICICI with ICICI Bank skewed the aggregate picture to some extent.

If one ignores ICICI Bank, the top and bottomline growth for the Nifty companies stand at 7.5 per cent and 8.3 per cent respectively as against 7.2 per cent and 6.5 per cent.

Send this article to Friends by E-Mail
Comment on this article to BLFeedback@thehindu.co.in

Stories in this Section
Scorpio will cost more


Cigarettes: Lighting up on filters
Much puff over policy
Will stubbing out ads hit sales?
Keep the pack
AirTel: National roaming
Gifts: Procedures and formalities
K-Gilt Savings Plan (Growth): Switch
MF flows in August — Pvt sector MFs cross Rs 50,000 cr
UGS 10000: Switch
Templeton MIP (Monthly/quarterly): Hold
IDBI-Principal Tax Savings Fund: Hold
Continuous erosion in gilts
ICICI Bank: Attractively priced
Kinetic Engineering: Hold
Tata Tea: Buy
Moser Baer: Buy
April-June for Nifty cos — Demand pick-up to the rescue
LIC Housing Finance: Hold/Avoid fresh exposures
Single-premium insurance products — Rest assured on returns
Boosting health cover
ING Vysya cash bonus
Positive short-term trend in Infosys
Book profit in NIIT
Increased FII limit propels Balaji Tele up 8 pc
Markets last week: Another weak bout
Nasdaq: Weak outlook
Payment, delivery in a day
Bonds carry some downside bias
Futures and options to lower risk
Satyam calls lose value
Taxability of profits from trading in futures/options
Options guide
Futures guide
Karnataka Power Corporation: Generating problems
IA online booking
`Produce, but only the right stuff' — Mr Naba Kumar Das, Chairman, Tea Board
Employee benefits — LTC and tax exemption
Employee's tax, employer's headache
July-September quarter: No-show for mutual funds
Income funds: Modest returns, hectic flows
Forced bank mergers — Leading to value erosion
Few dividends from taxing changes
GAIL is all about gas
It Adds Up!


The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |

Copyright 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line