Feb. 17--MUMBAI -- Indian companies grew at their fastest pace in six quarters in the October-December period, pointing to improved operational efficiency as they learned to work with tighter budgets and cope with the prolonged economic slowdown.
Any significant turnaround, though, is unlikely before the next government is formed later this year, analysts cautioned.
Net profit for these companies in the December quarter increased 18.9% from a year before, while net revenue grew at a more modest 7%, showed a Mint analysis of 299 companies that are part of the BSE 500 and for which comparable data was available for the previous 15 quarters.
On both the metrics, the pace of growth was the fastest since the end of the September 2012 quarter.
Banks, financial institutions, and software and energy companies were excluded from the review as they follow a different earnings model than the other companies on this list.
"Some positive signs we saw in the September quarter earnings seem to be carried forward. Cost rationalization is reaping benefits. Learning and benefits from cost-cutting lasts much longer and can lead to accelerated margin expansion in an up-cycle," said Ambareesh Baliga, managing partner of Edelweiss Global Wealth, the wealth management arm of Edelweiss Financial Services Ltd.
"We seem to have bottomed out as far as the economy is concerned," he said, adding that while there is no denying that the positive signs and optimism seen in the September quarter are continuing, it is too early to call the results a turnaround. "A lot depends on the election results and how the new government steers the economy," Baliga said.
The average operating profit margin at 12.4% was the best in six quarters, and the average net profit margin at 9.5% was the best in four quarters. The raw material-net sales ratio dipped to 36.2% from 36.7% in the previous quarter, suggesting that input cost pressures had eased. The employee expenses-net sales ratio dropped to 7.2% from 7.5%.
"There has been a significant contribution from pharma companies, and also large-size companies in IT (information technology) have posted decent set of numbers. FMCG (fast-moving consumer good) has benefited from muted volume growth and increase in prices has reflected," said Deven Choksey, managing director and chief executive of KR Choksey Shares and Securities Pvt. Ltd. "The (overall) positive trend has continued and will continue. We have stabilized on the base, but are waiting to ride," said Choksey.
Among the stand-out performers this quarter was Sun Pharmaceutical Industries Ltd, which sharply raised its revenue forecast for the financial year ending March after posting a 74% jump in net profit for the December quarter on strong overseas sales.
Smaller peer Aurobindo Pharma Ltd posted a fourfold jump in consolidated net profit on the back of higher sales due to product launches and growth in its formulation business in the US and Europe. Rival Cipla Ltd bucked the positive trend in pharma earnings trend and posted a 17% drop in net profit mainly on the back of increased material costs and foreign exchange losses.
Auto makers mostly posted earnings that surpassed analysts' expectations.
Tata Motors Ltd smashed street expectations after its profit almost tripled, as its UK unit Jaguar Land Rover Automotive Plc reported robust sales of luxury cars and premium sport utility vehicles, balancing out another dismal quarter for its domestic operations.
Mahindra and Mahindra Ltd, India's largest maker of utility vehicles, posted an 11.7% increase in net profit as demand for tractors rose and it cut costs, countering a decline in passenger vehicle sales. Maruti Suzuki India Ltd also reported a 35.9% year-on-year jump in net profit.
On the other hand, there seemed to be little to cheer about for metal producers. While Tata Steel Ltd, India's largest maker of the alloy by capacity, swung to a quarterly profit of Rs.503.24 crore compared with a loss a year before, as demand increased across its largest market of Europe, the earnings lag