India Market

Corporate India’s profits increase in September 2012 quarter

Stronger rupee helps strengthen profits

The 1,467 listed companies that announced their financial results for the September 2012 quarter, reported a 30.8 per cent rise in net profits compared to the year-ago quarter. We expect the profit growth to come down to 17 per cent once the remaining companies, particularly the oil marketing giants, announce their results.

We expect IOCL, BPCL and HPCL to report a net loss of around Rs.170 billion for the September 2012 quarter in absence of any subsidy announcement by the government. The petroleum ministry has exhausted 91 per cent of the funds allocated to it for the fiscal year 2012-13 and will not be able to announce any subsidy till it gets a Parliamentary nod for the same. This is possible only in the winter session of Parliament that begins on 22 November 2012. But, the oil marketing companies are scheduled to announce their results much before that, on 9 November 2012.

The losses incurred by the OMCs in the September 2012 quarter, however, are estimated to have been substantially lower than in the preceding quarter. Hence, we estimate the manufacturing sector to have returned into profits after reporting losses in the June 2012 quarter.

Corporate profits too are estimated to have risen substantially in the September 2012 quarter compared to the year-ago quarter (17 per cent) as well as the preceding quarter (48.4 per cent). Strengthening of the Indian rupee during the September 2012 quarter is believed to have provided a boost to profits.

The rupee had depreciated against the US dollar by 8.7 per cent in the September 2011 quarter and by 9.1 per cent in the June 2012 quarter, bringing huge forex losses to Indian companies on their short term foreign exchange liabilities. However, the rupee appreciated by 6.9 per cent in the September 2012 quarter and is believed to have brought forex gains to the Indian companies. We estimate other expenses, under which the companies report their forex losses, to have come down as a proportion of sales to 11.4 per cent in the September 2012 quarter from 13.5 per cent in the preceding quarter and 12.5 per cent in the year-ago quarter.
The year-on-year improvement in profits in the September 2012 quarter is expected to have been broad-based. The manufacturing sector is estimated to have seen a profit growth of 53.2 per cent, the non-financial service sector of 27.9 per cent and the financial services sector of 22.5 per cent compared to the September 2011 quarter.

In comparison with the June 2012 quarter, however, we expect only the manufacturing sector to have seen a rise in profits.