Small companies hog the limelight in financial year 2004-05

In contrast, net profit of large-cap (market cap above Rs 3,000 crore) firms went up by 25.47 per cent, while mid-cap firms (market cap Rs 300 cr-Rs 3,000 cr) went up by 46.11 per cent.

In comparison, net sales of small-cap firms went up by 13.01 per cent (24.60 per cent for mid-cap and 19.46 per cent for large-cap firms). In aggregrate, net profit of all firms went up by 31.15 per cent as compared to a growth in net sales of 18.06 per cent.

Analysts feel that ruthless cost-saving by small-cap firms continues and is the key factor for the bottomline growth.

For proof, look at interest cost of small firms — down by 9.78 per cent while that for the mid-cap firms went up by 4.49 per cent (up by 1.57 per cent for large-cap firms). Wages for large-cap firms shot up by 19.44 per cent as compared to 8.69 per cent for the mid-cap and 10.93 per cent for the small-cap.

According to Arvind Parik, director (finance) of Jindal Stainless, ‘‘Large cap firms have found it difficult to restructure their loans and bring down interest costs. Banks, FIs are unwillinging to go in for debt restructuring on huge exposures. On the other hand, on low exposure, small-cap firms have found it easier to retire high-cost debt with low cost ones.’’

Agrees Alok Agarwal, senior analyst, Motilal Oswal Securities, ‘‘The reasons for the strong performance are the overall boom in the economy and, secondly, softening of interest rates. Reduction in interest rates has helped the smaller companies more as it is easier for them to restructure their finances.’’

The same broad trend is also seen in the fourth quarter.

In fact, mid-cap firms have also been able to extract their chunk of meat in the overall trend of a higher bottomline as compared to topline. The large cap companies have been an exception to the trend in the fourth quarter.

According to Pashupati Advani, Director, Advani Share Brokers, ‘‘Small and medium companies have done well, but they are expected to because they are in the growth phase now. These are the companies coming up fast.’’

As was the trend in the entire year, even in the fourth quarter wages for the large-cap firms went up substantially as compared to small-and mid-cap companies.

As a director in IOC explained, ‘‘Bigger firms are now trying hard to retrieve their skilled labour. Hence, incentives and perks are going up and firms are trying best to retain the manpower which they think are needed for their long-term plans. Hence, wage bills of the large cap firms are shooting up as compared to the small cap firms.’’

Unfortunately for the workforce, this trend is expected to taper off in the next six months.