India Inc reports a lacklustre Q1

Mumbai: Earnings reported by 480 of the BSE 500 companies for the first quarter of FY20 has been quite lack lustre with year-on-year (yoy) quarterly revenue growth of 7.8 per cent and profit after tax (PAT) growing at 6.3 per cent.

Even such a performance has been possible mainly due to good show by the banking, financial services and insurance (BFSI) sector as without BFSI the PAT declined by 12 per cent yoy.

Besides BFSI, IT Services sector also managed fair revenue and profit growth during the quarter while among the heavyweights it was RIL’s good show that helped revenue and profit growth stay positive despite several companies’ earnings turning negative or below estimates.

Aggregate revenue of 480 companies belonging to BSE 500 index were up by Rs 1,57,507 crore to Rs 21,78,135.5 crore during April-June 2019 period as against Rs 20,20,628.5 crore in April-June, 2018 period, according to data compiled by Reliance Securities.

Total profit after tax of above BSE 500 companies were up by Rs 8,411.2 crore to Rs 1,41,567.2 crore as against Rs 1,33,156 crore in the same quarter previous year.

Quarter on quarter aggregate revenue of BSE 500 companies saw de-growth of 3.7 per cent from Rs 22,61,772.8 crore in January-March 2019 quarter while profit after tax saw 19 per cent growth from Rs 1,18,940.3 crore.

Among the Nifty-50 companies the aggregate revenue growth was modest at 6.3 per cent while the PAT grew at 2.5 per cent.

Only 8 Nifty-50 companies reported numbers above expectations, 11 Nifty companies reported results in-line with expectation, 15 companies reported mixed set of numbers and 16 companies reported numbers below estimates, according to Centrum Wealth Research.

Naveen Kulkarni, head of Research, Reliance Securities said, “The first quarter results of India Inc. were weaker than muted expectations with more misses than hits. Aggregate Nifty 50 companies earnings grew by 3.5 per cent year on year basis, primarily driven by the BFSI sector. Nifty 50 companies earnings ex-BFSI declined by 12 per cent yoy. The growth in BFSI sector was helped by lower base but the sector saw a greater number of earnings misses than hits with the most notable ones being Axis Bank and SBI.”

“The consumer sector reported better than expected operating performance with Asian Paints and Dabur reporting stellar set of numbers. Auto Sector continued to report subdued performance. Management commentaries across the sectors have been uninspiring as economic slowdown took a toll on their outlook. Consensus have downgraded Nifty 50 companies earnings by 5 per cent and 4 per cent for FY20 and FY21 respectively,” Kulkarni said.

Consumption slow down impact was visible for FMCG, passenger vehicles(PVs) and two wheelers but some segments bucked the trend, according to ICICI Securities.

“Sales volume of FMCG products slowed down (5-6 per cent yoy growth) while it dipped sharply for PVs and two wheelers. However, food as a category did relatively better for companies in FMCG, dairy. Also demand for lifestyle products (apparel, footwear, jewellery, decorative paints etc.) was reasonable given the challenging environment while organised retail witnessed robust double digit growth,” ICICI Securities said.

Gautam Duggad, head of Research, Motilal Oswal Financial Services said, “Both Nifty and our universe of companies’ performance was below our expectations. Like in the previous quarter, first quarter of FY20 profits were entirely driven by banks. Aggregate sales were largely in line while PAT missed our estimates. The performance was dragged disproportionately  by Oil & Gas, Metals and Automobile companies.”