Indian rupee banknotes of various denominations sit in a cash register at at the checkout counter of a hypermarket in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

UBS, Deutsche Remain Skeptics on India Company Earnings Rebound

(Bloomberg) -- Indian company earnings showed signs of recovery in the September-quarter, but analysts aren’t impressed.

A 14 percent year-on-year growth in net income for the NSE Nifty 50 Index companies is still below consensus, UBS Securities India Pvt. analysts Gautam Chhaochharia and Sanjena Dadawala wrote in a note Wednesday. This leaves scope for cuts in forecasts, they said.

Companies were expected to return to profit growth as businesses resumed stocking up after adjusting to the goods and services tax that was rolled out on July 1, and the aftershocks of last year’s cash ban faded. Carmakers, consumer firms and drugmakers posted recovery, while earnings at banks were mixed amid the lingering bad-debt problem and industrials faced execution challenges, the UBS analysts wrote.

“While the worst of demonetization and GST adjustments are behind and a gradual recovery is anticipated, consensus expectations for FY18 still appear to be unrealistically high,” Abhay Laijawala and Bijay Kumar, analysts at Deutsche Bank wrote in a note. The “hurdle rate” for second half of the fiscal year ending in March is high, they said.

The average net income at Nifty firms will expand 7 percent in fiscal 2018, versus consensus estimate of 13 percent growth, according to the UBS report.

©2017 Bloomberg L.P.

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