Given business activity was almost at a standstill due to the lockdown in the three months to June, expectations from India Inc were tempered. Sure enough, revenues and profits for the quarter plunged, with several top-rung firms posting losses.
Maruti Suzuki, Tata Motors, Bharti Airtel, JSW Steel, Interglobe Aviation were among those that bore the brunt of the disruption though some businesses did prove they were resilient. Asian Paints, for instance, turned in a reasonably good performance as did Hindustan Unilever, posting a fall in volumes of just 7 per cent year-on-year (y-o-y) for the June quarter, against estimates they would be lower by 11-13 per cent y-o-y.
For a clutch of about 350 companies (excluding banks and financials), revenues for Q1FY21 fell 32 per cent y-o-y while profits crashed 62 per cent y-o-y, despite the presence of three IT heavyweights corroborating economists’ forecasts of a big slump in GDP anywhere between 20-40 per cent in this period. At Maruti, for example, net revenues plummeted 79 per cent y-o-y, led by an 81 per cent y-o-y fall in volumes. TVS Motors posted a 68 per cent y-o-y drop in revenues, with volumes falling 71 per cent y-o-y.
As India ushers in Unlock 3.0, most economic indicators are either flat or showing slight signs of improvement. Last week, in a good sign, the electricity consumption gap was negative, the first time this has happened since the pandemic started. The number of e-way bills generated increased week-on-week.However, railway freight volumes were down marginally in July after increasing in May and June.
Companies, meanwhile, are able to mend the supply chain and get more workers back at their jobs. At Larsen &Toubro (L&T) the workforce has increased to within 20 per cent of the company’s peak requirements helping the engineering firm to ramp up execution. Maruti indicated demand is back to 85-90 per cent of pre-COVID levels. The auto maker is currently producing 4,000 vehicles daily and production could be ramped up to 4,900 vehicles if another shift is added in Gujarat.
Consumption of staples and foods has been fairly strong — Britannia turned in a stellar set of numbers — and the bounce-back in purchases of big ticket items, like cars, is encouraging. Companies have managed to rein in costs, wherever possible, to protect their margins. ACC’s results beat expectations as the company was able to bring down costs. Bajaj Auto reported better-than-expected gross margins even as revenues fell 60 per cent y-o-y due to an expected dive in volumes. —FE
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