Nifty companies like Maruti Suzuki, Ambuja Cements & Sterlite Industries to record profit fall for first time in 2 years
MUMBAI/NEW DELHI: Maruti Suzuki, Ambuja Cements and Sterlite Industries will lead the earnings fall for S&P CNX Nifty companies in the September quarter - the first profit fall in more than two years - as rising funding costs and higher raw material prices begin to bite.
The aggregate net profit of companies in the Nifty 50 - all industry heavyweights - is expected to drop 1.7% year-on-year in the quarter to September 2011, though revenue is likely to grow 19.4%, according to an analysis of these companies by the Economic Times Intelligence Group.
Cement manufacturers ACC and Ambuja Cements, auto maker Maruti Suzuki, metal manufacturers SAIL and Sterlite Industries (India), real estate firm DLF, and telecom companies Bharti Airtel and Reliance Communications are expected to post a double-digit decline in net profit compared with a year-ago.
Afirm trend in the prices of most raw materials, lower expectation of revenue from non-operating sources such as treasury income and sale of assets, and higher finance charges would prevent topline growth from translating into relatively better net profit for companies.
The deceleration is expected to span across industry with hardly any cheer for investors. The sectors that will be impacted the most include cement, automobiles, power, telecom, banking and finance, and real estate, our analysis shows.
While aggregate revenue is expected to be buoyant for the eighth consecutive quarter, the rate of growth has slowed down significantly from the 27% jump seen during the last quarter and 23% in the March quarter.
This could also mean topline growth would mainly reflect the inflationary trend in the economy rather than any meaningful growth in sales volumes. Net margin, which measures the extent of net profit with respect to revenue, is likely to shrink 170 basis points to 10.2% for the September quarter.
Lower profitability inevitable:
The lower profitability will be inevitable given rising interest outgo and lower proportion of other income in revenue. Going by the current macroeconomic scenario and data on hand, it appears that corporate India may take a little while before there could be signs of improvement.
Name-Deepak kumar jha
Pgdm (2010-12) 3 rd
The aggregate net profit of companies in the Nifty 50 - all industry heavyweights - is expected to drop 1.7% year-on-year in the quarter to September 2011, though revenue is likely to grow 19.4%, according to an analysis of these companies by the Economic Times Intelligence Group.
Cement manufacturers ACC and Ambuja Cements, auto maker Maruti Suzuki, metal manufacturers SAIL and Sterlite Industries (India), real estate firm DLF, and telecom companies Bharti Airtel and Reliance Communications are expected to post a double-digit decline in net profit compared with a year-ago.
Afirm trend in the prices of most raw materials, lower expectation of revenue from non-operating sources such as treasury income and sale of assets, and higher finance charges would prevent topline growth from translating into relatively better net profit for companies.
The deceleration is expected to span across industry with hardly any cheer for investors. The sectors that will be impacted the most include cement, automobiles, power, telecom, banking and finance, and real estate, our analysis shows.
While aggregate revenue is expected to be buoyant for the eighth consecutive quarter, the rate of growth has slowed down significantly from the 27% jump seen during the last quarter and 23% in the March quarter.
This could also mean topline growth would mainly reflect the inflationary trend in the economy rather than any meaningful growth in sales volumes. Net margin, which measures the extent of net profit with respect to revenue, is likely to shrink 170 basis points to 10.2% for the September quarter.
Lower profitability inevitable:
The lower profitability will be inevitable given rising interest outgo and lower proportion of other income in revenue. Going by the current macroeconomic scenario and data on hand, it appears that corporate India may take a little while before there could be signs of improvement.
Name-Deepak kumar jha
Pgdm (2010-12) 3 rd
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