Despite the turnaround in the commodities space, which has seen metals producers swing from losses to profits, India Inc’s performance in the March quarter has been less than ordinary. That’s despite a favourable base effect — Q4FY17 was the first full quarter post-demonetisation. At 13.6 per cent, the operating profit margin for a sample of 1,528 companies was the lowest in at least eight quarters; in Q4FY18, the OPM contracted by 114 basis points. Excluding other income, the net profits for the sample actually fell 2.6 per cent y-o-y against a rise of 24 per cent y-o-y in Q3FY18. “The Q4FY18 results were generally below expectations and have resulted in moderate downgrades to FY19 and FY20 net profit estimates,” Sanjeev Prasad, MD, Kotak Institutional Equities wrote, adding the Q4 net profit for the Nifty 50 Index fell 9 per cent y-o-y.
Topline growth has been just about satisfactory suggesting not too many companies have been able to push through big volumes and few have been able to take price increases to pass on the rising input costs.
Better consumer spends —private final consumption expenditure rose 6.7 per cent y-o-y — helped push up sales of durables and staples as reflected in the volumes for cars, two-wheelers and household products.
There is evidence of a pick-up in demand in rural India and Hero MotoCorp, which sells a very large share of its wheelers in the rural markets, is confident volumes will see a double-digit rise in 2018-19. Mahindra &Mahindra (M&M) reported very strong sales of tractors during the quarter and was even able to take a price increase for some brands. FE