For India Inc, it is a long road to turn the corner AS rising debt, thrifty consumers squeeze profits

May 05 2014, 09:37 IST
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Costly inputs, rising debt & thrifty consumers squeeze profits Costly inputs, rising debt & thrifty consumers squeeze profits
SummaryTCS may be confident FY15 will be a good year for the firm, but most of India Inc is struggling.

Tata Consultancy Services (TCS) may be confident FY15 will be a good year for the firm, but going by recent numbers, most of India Inc is struggling to push the top line and defend bottom lines in an economy debilitated by the near lack of fresh investment and fewer job opportunities.

Earnings for Q4FY14 are just a grim reminder of how much trouble the industry is in. While an Idea Cellular beat the Street with a jump in consolidated revenues of 16.2% y-o-y, Reliance Communications’ profits fell 48% y-o-y.

Hindustan Unilever’s volumes grew just 3% y-o-y — an 18-quarter low — and while the performance is creditable given the challenging environment, it’s only modest otherwise.

Maruti Suzuki reported a weak set of numbers, missing the Street’s estimates —Ebitda fell 8% sequentially. Jindal Steel& Power’s net profits crashed 47% y-o-y on the back of lower steel production and smaller tariff realisations.

Like many other corporates, the firm’s net debt has risen sharply — from Rs 24,400 crore in March 2013 to Rs 35,300 crore currently. With additional capex, it could rise to Rs 39,000 crore in a year, which analysts point out is discomforting. JSW Energy too fared poorly, reporting net sales that were lower 11% y-o-y, causing profits to dip 46% y-o-y.

Despite a 15% y-o-y increase in top line, the net profit for a clutch of 226 companies (excluding banking and financials), has grown by just 14% y-o-y. While that’s partly because raw material costs have risen by 50 basis points as a share of sales, there isn’t much of a boost from other income as there has been in previous quarters. Indeed, if one excludes software heavyweights from the sample, the growth in bottom line would have been in low single digits.

BHEL’s provisional results had shown there were no signs of any pick-up in the capex cycle; the engineering firm’s order book, at the end of March, 2014, remained stagnant at Rs 1 lakh crore, although inflows picked up somewhat in Q4FY14. Siemens too reported poor numbers with a drop in revenues of 8.4% y-o-y, widely missing estimates. Orders dropped 4% y-o-y leaving the backlog flat over the December quarter and the management indicated that given the closure for large orders was being delayed, it didn’t see its domestic operations picking up momentum.

With consumers watching their wallets, FMCG firms are cutting costs where they

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