Earnings are recovering, but demand is still weak


Although the economic recovery seems to be taking shape, demand has yet to be convinced, an analysis of the December 2020 quarterly results shows 1,772 companies (excluding banks and finance).

India Inc. reported a steady increase in revenue of 0.2 percent over this period compared to the same quarter last year. However, insignificant savings in input and borrowing costs, as well as the low base effect, gave a clear conclusion. The bottom line was also helped by a turnaround in 208 of the 478 companies that reported losses in the three months ended December 2019. For example, steelmakers such as Tata Steel, Jindal Steel and SAIL turned quarter-on-quarter against rising profits in increase in steel prices. Profit after tax for 1,772 companies rose 52.4 percent year-on-year in the December 2020 quarter.

Poor emission

Flat revenue growth is despite a low base – revenue fell 2.1 percent in the quarter of December 2019 (compared to December 2018). Although consumer companies and metals recorded good demand, peak growth was driven by poor player performance in sectors such as services and infrastructure.

For example, Hindustan Unilever, Marico, Godrej Consumer and Emami reported revenue growth of 10-20 percent. Car companies also recorded double-digit growth, after good volumes. Rising commodity prices favored metal players. Improving domestic steel consumption has led to improvements, for example, at Tata Steel, with a focus on value-added products that help better realization.

But the same cannot be said for companies in the service and infrastructure space. The overall growth of the airline and hotels and restaurants fell the most by 51 and 54 percent, respectively, thanks to the long-lasting effects of the pandemic. Infrastructure companies are still on the road to recovery. For example, Larsen and Toubro reported a 2 percent drop in consolidated revenue during the quarter.

Although revenue growth remains unclear, a 3 percent drop in material costs and a slight drop in fuel and energy costs helped increase operating margins. Out of 1,772 companies, about 1,412 manufacturing companies recorded an increase in operating margin to 20 percent in the quarter of December 2020 from 17 percent in December 2019. In addition to falling input costs, lower interest costs and higher other income (growth of 6.9 percent) helped growth get.


Quarterly results in December suggest that India Inc may be losing winds due to lower entry costs. The CRB (Thomson Reuters) Commodity Index – an indicator of basic commodity prices – has risen more than 10.5 percent since December 2019. This suggests that without a significant recovery in demand India Inc. may not be easy to pass on input price growth. This could act as wind earnings growth in the coming quarter.


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