Q4 parade: It146;s win some, lose some

Profit margins in the automobile sector will come under pressure in FY 06-07 as the sector grapples with rising steel prices and uncertain crude oil prices. While the demand has picked up following a cut in excise duties in small cars in this year8217;s budget, increased competition has led to a decrease in margins. 8220;Margins will be tight as steel prices are a cause for concern and an increase in crude prices will also hamper demand,8221; said an industry insider.

OIL 038; GAS IN RED SEA

The oil and gas sector in India is set to face another turbulent period this quarter. The all-time high crude oil prices and stabilisation of Mumbai High production may seem a good proposition for ONGC but the increased subsidy burden is likely to bring down the oil marketing companies8217; profit levels southwards. 8220;OMCs will see their profits erode in the wake of rising crude, as they have been unable to hike the prices of auto and cooking fuel to cover costs,8221; says India Infoline Analyst Prayesh Shah. Analysts expect that OMC8217;s total loss this fiscal would be around Rs 38,600 crore, up from Rs 20,100 crore.

INFRASTRUCTURE SMILES

Riding on the infrastructure thrust of the Budget and the buoyancy in the domestic and international markets, engineering and infrastructure companies are all set to show a strong performance in this quarter. 8220;Strong order book position, coupled with cost-cutting exercise, will ensure a good performance this quarter,8221; Angel Broking analyst Nalin Bhatt said. L038;T, with an order book position of over Rs 20,000 crore and their continuing thrust towards West Asia, are likely to lead the pack. In Q3, most companies8212;L038;T, Siemens, BEML, Crompton Greaves and Kirloskar8212; have shown a 25 per cent growth year on year. Analysts expect this trend to continue.

STEADY GROWTH FOR TEXTILES

Not likely to face any pressure on profit margins in the near future. With exports continuing to remain bullish and India able to maintain its cost in markets like the EU and the US, profitability of the sector is poised to remain steady if not improve in FY 06-07. Recent export data shows that India8217;s unit export price increased 10 per cent in EU at a time when prices fell by 1.1 per cent. 8220;We are witnessing a garment-driven and export-led growth in the sector today,8221; said Confederation of Indian Textile Industry Secretary General D K Nair.

BANKING ON GROWTH

A robust macro-economic environment and higher capex by India Inc has fuelled the credit growth of the banking sector in the first three quarters. Although the growth remains high, credit growth has come under severe test following the rise in interest rates and temporary liquidity crunch in the system. Banks are expected to repeat their Q3 performance in Q4 as well with private banks expected to post 15-25 per cent growth in profits. 8216;8216;Rising interest rate has posed a challenge for the banks,8217;8217; saya an analyst with Angel Broking.

SWEET PILL FOR PHARMA

If you have been betting on the fortunes of Indian pharmaceutical industry, it8217;s time to collect your booty. The fourth quarter of fiscal 2006 continues to remain bouyant with pharma analysts expecting a positive results from all the big companies. 8220;Due to low base effect of previous fiscal, the pharma companies will show 15 per cent growth in profits this year,8221; says Karvy8217;s pharma analyst Rahul Sharma. As compared to MNC pharma companies, the Indian companies8212;including Ranbaxy, which has had a poor run this year8212;will record higher growth as they will be adding overseas arms8217; results into their balance sheets.

GOOD CHEER FOR IT 038; TELECOM

The stakes have been raised and the industry is not just expected to keep growing at 30-40 per cent, but also contribute more substantially to the country8217;s overall growth rate. On the growth front, none of the IT companies disappointed in Q3. 8216;8216;Expectations of growth are reasonable, at around 25 per cent, which the IT sector is set to reach,8221; says Tejas Doshi of Sushil Finance. Many IT companies have already given better guidance for Q4. Moreover, expect better dividends and freebies. In the telecom sector, where tariffs are at rock-bottom levels, the sentiment is bullish, thanks to break-neck growth.

Sumant Banerji, Zeeshan Shaikh, George Mathew, Pragya Singh