Early birds report muted profit growth for April-June

ET Intelligence Group: The early trend in the first-quarter results season showed a sustained double-digit growth in aggregate revenue while a higher year-ago base and subdued performance by Reliance Industries (RIL), the country’s largest company by revenue and market cap, pulled down the net profit growth to a single digit. Revenue for a sample of 230 companies that have declared results so far rose 10.1% whereas net profit increased 3% year-on-year.

Revenue grew in double digits for the second consecutive quarter while profit growth was the slowest in six quarters. In the year-ago quarter, top line rose 6.5% whereas profit grew 47.8%.

Good Show by Banks and Finance Cos

The sample’s operating margin contracted by 210 basis points year-on-year to 18%.The aggregate numbers were skewed by performance of RIL, which contributed 40% to the sample’s revenue and 20% to its net profit. The company’s consolidated net profit fell 4% year-on-year to ‘17,445 crore following pressure on the refining business. Revenue increased by 12% to ‘2.4 lakh crore. Excluding RIL, the sample’s aggregate revenue growth in the June quarter improved to 11.9% while net profit grew by 18.5%, largely driven by the strong show of banking and finance companies.

Banks and finance companies continued to report robust revenue and profit growth of 31.9% and 40%, respectively.

The growth remained in double digits for each of the nine quarters under observation. The lenders together contributed 17.6% and 35.9% to the total sample’s revenue and net profit in that order, the highest in at least 13 quarters. Excluding these companies, the sample’s revenue grew by 6% whereas net profit fell by 10.3%.

At the beginning of the results season, analysts had anticipated either a marginal drop or a muted growth in aggregate profit due to weakness in the oil and gas sector. Elara Capital projected 6% year-on-year growth in sales and flat earnings for the companies that it covered. “Energy might be the primary detractor, negatively affecting revenue as well as earnings this quarter; excluding this, we expect our coverage universe to post double-digit YoY revenue and earnings growth,” brokerage mentioned in a preview note.

As the result season progresses and more companies declare results, a clear trend in aggregate growth would emerge in the coming weeks.