In 2009-10, the British arm Jaguar Land Rover (JLR), reporting a loss of £14.2 million (about Rs 97 crore), was a drag on Tata Motors' profits.. Just a year later, as sales picked up speed, JLR hit profits of £1042.5 million (about Rs 7,600 crore) helping Tata Motors pip its competitors to the post this year.

This fiscal many a Sensex company reported consolidated profits that outstripped what the parent could manage on its own, thanks mainly to the improved showing by the subsidiaries.

While standalone net profits for Sensex companies grew 12.5 per cent over the previous year, their consolidated profits raced ahead by 21.5 per cent.

In absolute terms, subsidiaries added as much as 36 per cent to the standalone net profits of their parent companies.

This is in contrast to 2009-10, where subsidiaries were a drag on their parents' performance.

Then, consolidated net profits grew only by 7 per cent while the parent companies on their own managed 9 per cent.

In 2010-11, subsidiary companies also managed to report better sales growth than their parents.

Strong show

Net sales on consolidated operations grew by 22.6 per cent in 2010-11, a tad better than standalone turnover that rose 21 per cent.

This is again in contrast to last year, when consolidated sales were at less than half what the parents managed by themselves.

In most companies, improved volumes and realisations from the strengthening of the economic recovery seem to have aided performance. As with Bharti Airtel's acquisition of Zain in mid-2010, top-line growth has come from acquisitions too.

Also, the lower contribution of ‘other income' at the consolidated level reveals better quality of earnings.

Profit growth not broad-based

However, a further reading of the numbers reveals that the profit growth has not been broad-based.

The 21.5 per cent growth in consolidated net profits has been achieved predominantly due to Tata Steel and Tata Motors reporting massive turnarounds.

From a loss of Rs 2,488 crore in 2009-10, Tata Steel returned to a profit of Rs 7,292 crore in 2010-11. Thanks to the strong volume growth, favourable product and market mix and cost reductions at JLR, Tata Motors improved its profits to Rs 9,054 crore this year from Rs 1,505 crore last year.

Consolidated profit growth excluding these two companies came in at 8 per cent.

Besides, companies such as DLF and Hindalco, whose subsidiaries' contribution to total sales is between 67 and 70 per cent, witnessed a fall in profits.

Jump in interest costs

Bharti Airtel, Maruti, Reliance Communications and State Bank of India have also seen a fall in profits this year.

For both the telecom companies, a huge jump in interest costs from mounting debt and falling margins have been the major concerns.

Despite the turnaround at Novelis due to volume growth and product-mix improvements, Hindalco's net profits fell by 37 per cent on high input and interest costs.

Consolidated operating margins at 21.2 per cent, were still lower than standalone margins, which stood at around 23 per cent.

Interest costs rose by 42 per cent year on year for the Sensex companies and their subsidiaries (banks were excluded for these calculations).

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