As growth has turned into a mirage and margins remain under pressure,India Incs reliance on other income is only growing as they announce their profit numbers for the last quarter. Even a sharp rupee depreciation during the quarter,which has been in news for its negative impact,has also,in a way,emerged as a saviour for several top companies.
In the quarter ended June 30,while the growth in net sales for 18 companies that are part of Nifty and have announced their results as on Thursday,stood at only 3.3 per cent,their net profit rose by 7.4 per cent. The joker in the pack is the other income category,which,for these 18 companies has risen by 22 per cent from Rs 9,106 crore in June 2012 to Rs 11,082 crore in the last quarter.
If banks are excluded from the list,then the remaining 13 companies that include the likes of RIL,TCS,Infosys,L&T,ITC and Maruti Suzuki,among others,and account for over 45 per cent of the Sensex weightage,the growth in net sales is only 1.5 per cent,and the net profit has grown by just 2.2 per cent. The other income has,however,risen by 12.3 per cent from Rs 4,933 crore to Rs 5,540 crore. If we exclude the other income figure from profit numbers for the quarter (for both the quarters in comparison) then,on a year-on-year basis,the aggregate profit for these companies show a decline of 1 per cent.
As the rupee struggled against the dollar during the quarter,IT service exporters TCS and Infosys announced a rise in their revenues by 21 and 17 per cent,respectively. Even Maruti Suzuki,which witnessed a contraction in its revenue for the quarter,saw its profits rise by 52 per cent as the company benefited from cheaper imports following the fall in the yen.
Experts say that India Inc is going through pain there is hardly any bottomline growth and the situation is not getting any better. Rupee depreciation will impact the balance sheet of companies in the capital intensive sectors,which will see their liabilities getting restated,even as it does not impact the profit and loss statement. RIL disclosed that it witnessed a rise in its debt by over Rs 5,300 crore on account of the foreign exchange changes during the quarter.
The companies that have had major gains in other income category during the quarter include Maruti Suzuki (82 per cent),TCS (39 per cent),RIL (33 per cent),and the list goes on. But that is not a variable that reflects real growth for the company and provides it with the desired strength to expand and go for investments.
Sandeep is a senior assistant editor based in Mumbai.