Coronavirus Impact: Profitability Of 44 Nifty 50 Firms Seen Taking A Hit In FY21
The National Stock Exchange of India building at Bandra Kurla Complex, Mumbai. (Photo: Twitter/@NSEIndia)

Coronavirus Impact: Profitability Of 44 Nifty 50 Firms Seen Taking A Hit In FY21

Nearly 90 percent of large caps that form the benchmark Nifty 50 have seen a cut in earnings estimates for the next fiscal, as the world’s largest lockdown to contain the coronavirus pandemic threatens an economy that’s already set to grow at its slowest pace in a decade.

Forecast for earnings per share—the measure of profitability—has been lowered for 44 of the 50 constituents for FY21, which starts in less than 10 days, according to Bloomberg data. Of the six companies that haven’t seen a downgrade, forecasts for two are revised upwards by less than a percent while that of four remain unchanged.

India’s equity benchmarks have tracked the worst global selloff in more than a decade before recovering some losses. Both Sensex and Nifty 50 have tumbled about 25 percent in a month as Covid-19 cases in India rose to 724, including 13 deaths.

The deepest cut in EPS estimate is for Tata Motors Ltd., followed by Oil & Natural Gas Corporation Ltd., Tata Steel Ltd., HDFC Bank Ltd., GAIL (India) Ltd., Vedanta Ltd., Reliance Industries Ltd., Hindalco Industries Ltd., and Bharti Airtel Ltd., among others.

Bharat Petroleum Corporation Ltd., Axis Bank Ltd. and Mahindra & Mahindra Ltd. are among the companies that either witnessed a marginal revision in estimates or no change.

Here are the reasons brokerages cited for cutting earnings estimates...

Tata Motors

Analysts lowered EPS estimate for the homegrown automaker as the coronavirus outbreak is expected to hit demand of its luxury car brand Jaguar Land Rover in key markets. The company also issued a profit warning for fourth quarter amid these concerns.

ONGC

India’s largest oil and gas explorer witnessed a cut in its earnings estimates on account of a sharp fall in crude oil prices and an expected cut in gas prices. The selling price of oil and gas are currently below its cost of production.

Tata Steel And JSW Steel

Fall in demand for the alloy and lower steel prices are expected to weigh on the earnings of steelmakers, prompting the analysts to cut EPS forecasts.

HDFC Bank

Slower loan growth, switch to less risky loan book which can be net interest margin dilutive, weaker fee income growth due to lower disbursements from high margin business and a slowdown in consumption weighing on spends are some of the factors that may drag the private lender’s earnings.

GAIL India

A fall in prices of crude and gas is expected to impact earnings of GAIL India's three key segments—petrochemical, LPG and marketing—leading to a cut in earnings forecast for India’s largest gas distributor.

Vedanta

Lower demand and prices of commodities like aluminium, zinc, steel, iron ore, copper and oil prompted analysts to reduce their EPS estimates.

Reliance Industries

Earnings forecast for India’s most valued company has been cut due to lower refining and petrochemical margins as an adverse excess supply environment exacerbated amid near-term weakness in demand.

Hindalco Industries

A fall in demand and lower aluminium prices are expected to weigh on the earnings of the world's largest aluminium producer.

Bharti Airtel

Analysts cut EPS forecast for the telecom operator as a higher-than-estimated payout related to adjusted gross revenue dues may weigh on its earnings.

Indian Oil

A fall in fuel demand due to lockdown and an already slowing economy are expected to hurt India’s largest oil marketer. Besides, poor refining and petrochemical margins may drag the refiner’s earnings.

(The reasons for reductions in EPS estimates have been compiled from the research reports of brokerages including Macquarie, Morgan Stanley, Kotak Securities, Nomura and Antique Stock Broking, among others.)

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