Nifty 50 Q3 Results Review: India Inc.'s Demand Boost Runs Into A Familiar Bump
Here's how India Inc. fared in the quarter ended December.
India Inc.’s earnings and revenue jumped in the third quarter on a pickup in economic activity, improved domestic demand, low interest rates and better tax collections. But rising input costs weighed on the operating performance.
The aggregate revenue and net profit of Nifty 50 companies rose 23.4% and 30.6%, respectively, over a year earlier to Rs 16.1 lakh crore and Rs 1.64 lakh crore in the quarter ended December, according to Bloomberg data. The cumulative operating income stood at Rs 2.52 lakh crore.
Ebitda margin for most sectors narrowed on cost inflation. Automobiles, information technology, and construction materials and metals witnessed the highest contraction in average margin on an annual basis.
The Bloomberg Commodity Index—that covers prices of oil, natural gas, copper, zinc, and other commodities—averaged at 110.97 in the three months to December compared with 74 a year earlier. Prices of Brent crude, aluminium, zinc, tin and steel, among others, have risen in the last one year.
Of the 41 Nifty 50 companies for which Bloomberg consensus estimates for Q3 FY22 adjusted net profit were available, 22 beat forecasts and 19 missed.
Energy and financial sectors constituted more than half of the aggregate revenue and profit share in Q3 FY22. While energy and materials witnessed the highest year-on-year growth in profit after tax, automobiles saw the biggest decline.
Energy
Improved refining margin, rising product spreads, and inventory gains on an increase in oil prices aided companies such as Reliance Industries Ltd., Indian Oil Corp. and Bharat Petroleum Corp.
Oil & Natural Gas Corp.’s performance was supported by higher oil and gas realisation.
Financials (Including Banks And Insurance)
Increased credit offtake during the festive season, lower slippages, and better net interest income growth helped the banking and financial sector. Axis Bank Ltd., Bajaj Finance Ltd., and SBI Life Insurance Co. are the top three companies with the highest year-on-year growth in net profit.
Metals
Tata Steel Ltd. and JSW Steel Ltd. saw their profit rise on higher steel prices, though offset by rising input costs. Hindalco Industries Ltd. benefitted from improved sales volumes and lower finance costs.
Cement
The sector was adversely impacted by weak volumes owing to unseasonal rains and high energy costs.
Shree Cement Ltd.’s profitability declined due to higher power and fuel costs, while lower finance costs boosted UltraTech Cement Ltd.’s net profit over the year earlier.
Pharmaceuticals
A rise in raw material costs due to supply-chain disruption in China and continued price erosion in the U.S.—the biggest market for most Indian drugmakers—weighed on the pharma sector.
But better sales in key markets and diversification of suppliers across geography aided the profitability of Dr. Reddy’s Laboratories Ltd. and Divi’s Laboratories Ltd.
Automobiles
A decline in retail demand for two-wheelers and tractor sales, prolonged chip supply issues, and rising input costs dented the profitability of Indian automakers. Profit fell over a year earlier for Bajaj Auto Ltd., Hero MotoCorp Ltd., Maruti Suzuki India Ltd. and Tata Motors Ltd.
Information Technology
Large deal wins and demand for digital services offset the seasonality impact of holidays on the information technology sector.
“The continued hiring momentum offered further visibility on demand and deal ramp-ups,” Motilal Oswal said in a report. Infosys Ltd. and HCL Technologies Ltd. led the performance by reporting the highest sequential profit growth among Nifty 50 peers.
Fast-Moving Consumer Goods
Rural slowdown and higher raw material prices weighed on the sector. While price hikes supported the performance of Hindustan Unilever Ltd., higher sales across segments helped ITC Ltd. beat profits estimates.
Telecom
The sector’s revenue rose sequentially on tariff hikes, 4G subscriber additions, and a decline in low-cost users.
But increased expenses such as of network operating, access charges, licence fees, and marketing, besides a rise in finance costs caused Bharti Airtel Ltd.’s profit after tax to decline over the preceding three months. Reliance Jio Infocomm Ltd. saw its earnings rise but missed estimates.
(Compiled from the research reports of Motilal Oswal, Yes Securities, ICICI Securities.)
