India Inc’s good headline numbers for the September quarter are the result of strong rural demand, some price gains, huge savings and the stellar comeback by IT majors. Aggregate revenues are weak but steep cost cuts have helped firms protect margins.
However, companies remain cautious waiting to see whether the spurt in consumption — much of it the result of pent-up demand and purchases for the festive and wedding seasons sustains beyond December.
Without a meaningful increase in revenues, it might be difficult for companies to expand operating margins further since purchasing power in urban demand appears to be somewhat muted. At Maruti Suzuki, for example, rural retail volumes grew by 10 per cent year-on-year, while urban and semi urban demand was flat y-o-y.
The good news is that the four tech majors are adding to their headcount and that market — for both white and blue collar jobs — is looking up and there seems to be a revival. Rural consumption should remain reasonably good since the government continues to spend on infrastructure and affordable housing. Moreover, the good monsoon should result in a strong kharif output.
The subdued growth in aggregate revenues in the September quarter —- a fall of 8.27 per cent y-o-y for 805 companies — stems from a sharp fall reported by some large players and only small increases for others; a 24 per cent y-o-y fall in the revenues at Reliance Industries, a 12 per cent y-o-y drop at Larsen & Toubro, a 65 per cent y-o-y drop at Shoppers Stop and a 66 per cent y-o-y fall at Interglobe Aviation.
HUL’s organic volumes increased by just 1 per cent y-o-y in the quarter and revenues by just 3 per cent y-o-y. ACC’s volumes, were up 1 per cent y-o-y leaving revenues flat. Although net selling prices at Bajaj Auto were up 5 per cent yoy, revenues fell 7 per cent yoy thanks to a 10 per cent yoy drop in volumes.
The good performances came from Asian Paints, which reported a stellar 11 per cent increase in volumes that drove up revenues 6 per cent y-o-y, as well as Britannia Industries, which saw a revenue growth of 12.1 per cent y-o-y on the back of robust volumes increases at 9 per cent y-o-y. —FE
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