India Inc’s performance for the three months to December 2019 has been abysmal with companies struggling to grow revenues.
Maruti Suzuki’s net revenues,for instance, rose by just 5 per cent year-on-year (y-o-y) with the carmaker reporting only a 2 per cent rise in volumes during a festive period. At Asian Paints the growth in domestic decoratives was a dull 3 per cent y-o-y since volumes grew in low double digits that implied realisations must have weakened. At the other end of the spectrum, L&T reported a 3 per cent y-o-y fall in core E&C revenues. Even where volumes grew reasonably well, like at Godrej Consumer’s local operations, the sharp fall in realisations resulted in revenues growing by just 1 per cent y-o-y.
Profits are up but that’s more thanks to falling costs and lower tax outflows. At Bajaj Auto, the Ebitda margin expanded 230 basis points y-o-y on better gross margins led by lower raw material prices. But managements remain cautious as prices of some key commodities are rising whereas demand, especially in rural India, remains weak and key sectors like construction and real estate show no signs of recovery.
Given the slowdown in markets overseas, managements of IT firms like TCS are conservative while speaking on the outlook, noting that it would not be easy to replicate the growth rates of the past. That State Bank of India’s corporate loan book contracted during the quarter is evidence of the sluggishness in industry. Sales for a group of 431 companies contracted 1 per cent year-on-year; operating profit margins rose 132 basis points y-o-y as costs contracted by over 2 per cent y-o-y. Some large commodity players like JSW Steel posted a sharp drop in profits of 88 per cent y-o-y.
Manufacturers of consumer goods say rural demand is yet to show a resurgence, and in some pockets, has slowed more. Hindustan Unilever managed to grow volumes by 5 per cent y-o-y in Q3FY20 on a high base. —FE
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