Given that few sectors, like IT and automobiles, have shown good results for the September quarter, it is a no-brainer that India Inc will take a few quarters to bounce back. What is interesting, however, is the increased share of exports in the toplines of various companies, Tata Steel and Tata Motors are the most obvious names that come to mind—this is both the result of a 10% fall in the rupee’s value as well as the fact that global trade volumes have begun to pick up. For companies that don’t have much of an export market, such as BHEL, the results have been disastrous. The equipment supplier’s revenues were down 15% yoy and new orders were down to a trickle. Worse, since buyers as in the power sector are in an equally precarious state, BHEL has been reduced to making larger provisions for doubtful debts. The core sector, despite the good numbers shown in the index some days ago, remains weak. If, despite this, a Pepsi—and a Coca Cola before that—announced investment plans, that’s because the FMCG and durables markets are looking up, a combination of rising urbanisation and tastes changing as people move up the income chain, even if at a slower pace. Sales at Ashok Leyland fell 23% yoy while cement volumes were subdued at below 3% and average realisations rose just 6-7%. In the capital goods space, the poor results are despite overseas orders rising to a 10% share, up from 6% in FY12—the other saviour is PSU firms which, by and large, have managed to keep up their investment drive. If capital investments are pruned as part of the planned austerity drive, this will ensure capital goods results will worsen over the next few quarters.
The rupee cuts both ways and import costs are also higher and, along with higher inflation, this has meant operating profits are up just 6.5% yoy for a sample of 1,684 companies. As a result, tax payments for the sample companies are actually down a bit, something not seen often in the past. One of reasons for this, a red signal to the Reserve Bank of India hopefully, is the sharp rise in interest costs. For the sample companies, these are up 30% yoy—while the normalisation of the MSF corridor is good news, the overall hardening in yields suggests interest costs will continue to remain high. This is bad news for