Software sector leads in quarterly results

MUMBAI, OCT 19: Indian software firms are the top performers in the first week of the results reporting season with their average net pro...

MUMBAI, OCT 19: Indian software firms are the top performers in the first week of the results reporting season with their average net profits rising over 66 per cent in the quarter ended September, a Reuters analysis shows.

But analysts said it was premature to comment on corporate earnings as a whole because too few companies had released numbers and there were no other sectoral trends. Results are being keenly watched for signs of vindication of the belief that a beginning economic recovery has driven Indian shares to all time highs above the 5,000 mark recently.

Eleven of the 27 firms surveyed were software firms which showed average net sales growth of 48 per cent. The rest, from a cross-section of industries, posted an average net profit growth of over 35 per cent and net sales growth of about 20 per cent.

Average net profit for all the 27 firms grew 47 per cent during the period, while net sales rose an average 25.64 per cent. quot;Software has posted a fairly good performance, in line with expectations,quot; said K Ramachandran, head of research at Birla Sun Life Securities. The sector8217;s performance has improved over the previous quarter, when average net profit growth was 55 per cent.

quot;It is a good sign that software companies like Satyam Computer Services, Infosys Technologies, BFL Software have reduced their exposure to the Y2K business,quot; Ramachandran said. Infosys posted a 131 per cent increase in net profit and an 81 per cent rise in net sales during the July to September quarter. The firm said it is now focusing on e-business clients.

Analysts said it augured well that companies were looking for alternative sources of business to maintain profitability. quot;As far as growth rates are concerned there is no reason to doubt the sustainability,quot; said Ramachandran.

quot;Many global companies will be looking at basic software services after their attention reverts from the Y2K problem. That should result in a substantial jump for business for Indian software companies,quot; he said.

Story continues below this ad

Gujarat Ambuja Cements was the only cement firm which announced results last week. Its net profit zoomed 194 per cent to Rs 50.05 crore as compared to Rs 17.02 crore in the period from July to September 1998. Sales rose 16.27 per cent to Rs 281 crore from Rs 242 crore.

Figures from the Cement Manufacturers8217; Association showed despatches of cement in the period from April to September 1999 had risen to 45.18 million tonnes from 37.26 million a year earlier. This season is usually dull for cement sales because construction activity is minimal in the monsoons.

But Gujarat Ambuja said its profits were mainly driven by cost reduction, though an increase in prices also helped. quot;Cement is definitely a recovery story, but just because Ambuja has done well, it does not mean that all cement companies will do as well,quot; said Nishid Shah, head of research at Inquire Indian Equity Research. He said sales of medium and commercial vehicles were picking up, suggesting higher freight movement which was a pointer to increased economic activity.