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Not a great quarter for India Inc.
Wed, 9 May Pre-Open

The result season is here again. FY12 has concluded and the annual performance of around 322 companies in front of us gives us enough flavor of what happened last year and what we might expect from this one. So let's take a look at how the various sectors have performed.

We will start with the outperformers. The Finance sector witnessed a turnaround during the quarter registering the highest year on year (YoY) bottomline growth across different sectors. Not just that, the operating margins witnessed a growth (YoY) for the first time in the year during the quarter.

Across the sectors, Software stocks registered the highest annual growth in the topline. However, sequentially, the growth has slowed down. At operating profit and net profit levels, the IT stocks registered second highest growth after the Finance segment. However, unlike the latter that has seen a sequential improvement in sales and profits, the software companies' performance left a lot to be desired.

The manufacturing sector* also witnessed good annual growth at the topline level during the quarter. Even after excluding Reliance Industries that posted reported exceptionally bad results, the operating margins for the sector declined (YoY) during the quarter. This was due to weakness in demand and increase in costs on an annual basis. However, sequentially, the quarter proved better at the bottomline level as annual net profit growth turned to positive from negative (in the previous two quarters).

Overall, out of 322 companies that have reported results, 45% reported a decline in the bottomline. Most of the sectors such as auto, cement, construction, oil & gas, metals and steel companies saw a sluggish growth at bottomline level while some respite was offered by banks and capital goods.

To summarize, the quarter confirmed the fears of a slowdown in demand coupled with an increase in raw material cost and depreciating rupee. Even if some savings are attained at cost level, the pricing power is at risk due to low demand. Many more companies are yet to declare results. Hence, one should not be surprised to see sales growth and margins slipping further down.

*Companies with raw material contributing to over a quarter of the topline

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