ICICI Direct: India Inc. Weathers Covid-19 Storm

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ICICI Direct Report

Q1 FY21 (April-June) Corporate India results were expected to be a washout courtesy nationwide lockdown due to Covid-19 in April, gradual easing of restrictions starting May-June.

At the index level, however, excluding banks and non-banking financial companies and a couple of commodity players that are yet to announce quarterly results, topline fall was limited to 33% YoY.

This represents resilience of India Inc. in challenging times with key sectors like IT actually growing YoY and arresting the topline decline.

With bulk of people working from home and increased reliance on connectivity i.e. both data, voice, telecom sector actually outperformed with sales growing approximately 14% YoY thereby enabling smooth corporate functioning and validating the proverb “Data is the new Oil”.

On the profitability front, at the index level, operating profit decline for Q1 FY21 was limited to 29% YoY led by approximately 100 basis points expansion in Ebitda margins to 16.5%.

It was largely driven by lower raw material costs at key oil refiners amid approximately 38% QoQ decline in average crude prices and elevated retail fuel prices.

Raw material costs as a percentage to sales for Q1 FY21 was at approximately 40% versus its usual trend of approximately 50%.

Benefits of raw material costs savings were negated by negative operating leverage given fixed nature of employee as well as large part of other expenses.

In Q1 FY21, profit after tax fell 43% YoY, aggravated by higher interest and depreciation charge and partially supported by lower effective tax rate.

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ICICI Direct EarningsWrap Q1FY21 Update.pdf

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