Nifty Q1 Earnings: Saving Cash During Pandemic Is The Theme

Indian Inc. cut costs in a quarter marred by the impact of Covid-19 lockdown to cushion their operating performance.

For 35 Nifty 50 constituents that have reported their earnings for three months ended June, focus was on cushioning themselves from the unprecedented impact of the world's strictest lockdown to contain the pandemic. Managements, however, sounded more certain than in the previous quarter as the economy gradually reopens after two months of near-complete lockdown.

Banks and financial institutions continued to report double-digit growth in their net interest income or core income. Most information technology companies resumed their sales and margin guidance, which they suspended in the previous quarter because of the uncertainty arising from the pandemic.

Auto companies that have reported earnings so far saw their revenue fall by half as April was a complete washout. Tractors were an outlier with Mahindra & Mahindra Ltd.'s farm segment notching a growth during the quarter, aided by sales in May and June.

Five of the 35 companies that have reported earnings so far, including India’s largest passenger carmaker Maruti Suzuki India Ltd., reported a quarterly loss.

Here's how the sectors fared in the quarter ended June:

Agriculture

UPL

• A low base, better performance in its India business aids net profit growth.
• Covid-19 related pre-buying in Q4 of FY20 impacted revenue.
• Management confident of revenue and Ebitda growth for the full year.

Automobile

Auto companies reported zero sales for the month of April which impacted their quarterly results.

• Maruti: 80% drop in quarterly sales leads to first loss since listing. The loss, however, was cushioned by lower operating expenses and higher fair-value gain on the invested surplus.
• Bajaj Auto: Results in line with estimates. Management confident of motorcycle sales improving from August and September.
• Mahindra & Mahindra: Tractor segment outperforms, aided by second-highest tractor sales ever in June. Passenger vehicle sales fell nearly 80%.
• Tata Motors: Shutdowns, supply-chain bottlenecks led to seventh quarterly loss in the last nine quarters. Plans to cut Jaguar Land Rover capex by 65%.

Cement

UltraTech

• Results ahead of estimates due to lower costs.
• Cut overall capex plan to Rs 1,000 crore to conserve cash.
• Expects cost optimisation worth Rs 500 crore in FY21.

Construction

Larsen & Toubro

• Reported a profit because to one-time gain and tax reversal worth over Rs 500 crore.
• Lost revenue worth Rs 12,500 crore during the quarter due to the lockdown.

Consumer Goods

• Hindustan Unilever: Acquisition of Horlicks aided growth. Excluding the GSK portfolio, revenue would have fallen 7% and volumes would have contracted 8%.
• ITC: Operational performance weak. FMCG, agri business saw revenue growth. Cigarette volumes, according to Macquarie, declined 40%.
• Nestle: Results were below estimates. Domestic sales were flat, while exports saw a decline of 9%.
• Asian Paints: Washout month in April. Decorative paints business saw double-digit growth in June.
• Britannia: Cost optimisation, supply chain efficiency contributed to strong quarter.

Oil & Gas

• Reliance Industries: One-time gain contributed to profit; all core segments saw a decline in revenue. Jio earnings met estimates as tariff hikes contributed to ARPU gain.
• Indian Oil: Returns to profitability. Exceptional items in the base quarter. GRMs remained negative.

BFSI

Asset quality of most banks, barring Kotak Mahindra Bank Ltd., was either stable or improved on a sequential basis. Loans under moratorium for the lenders saw a decline compared with the previous quarter.

Stake sale in subsidiaries aided profit of State Bank of India and ICICI Bank Ltd.

• HDFC Bank: Decline in loans under moratorium at 9.2% and asset quality stable. Auto loan unit under scanner.
• ICICI Bank: Stake sale in its general insurance and life insurance business contributed to profits. Loans under moratorium declined to 17.5% from 30% in the March quarter.
• SBI: Stake sale in its life insurance business contributed to profit. Provisions declined. Loans under moratorium at 9.5%.
• Kotak Mahindra Bank: Asset quality deteriorated and provisions tripled. Loans under moratorium down to 9.65% from 26%.
• IndusInd Bank: Muted advances and deposit growth. Board approved raising of funds. Loans under moratorium down to 16% from 50%.
• Axis Bank: Net profit declined as provisions rose. Loans under moratorium at 9.7% from 25%.
• Bajaj Finance: Profit fell on accelerated provisions for Covid-19. Consolidated moratorium book down to 15.7% of AUM from 27% in the previous quarter.
• HDFC: Stake sale in HDFC Life cushioned decline in net profit. 22.4% of total loans and 16.6% of individual loans under moratorium.

Information Technology

• Infosys: Expects 0-2% revenue growth in FY21 and margins in the range between 21-23%.
• HCL Technologies: Expects 1.5-2.5% revenue growth in the next three quarters. Expects margins to range between 19.5% and 20.5%
• Tech Mahindra: Showed operational resilience due to cost cuts, cash-flow generation.
• TCS: Management said impact of Covid-19 has bottomed out. At $6.9 billion, total deal wins down sequentially.
• Wipro: Profit rose, margins expanded sequentially.

Pharma

• Sun Pharma: One-time settlement of Taro's litigations led to net loss. U.S. business accounted for 29% of the total sales.
• Dr Reddy's: Lower sale of prescriptions led to decline in India business. European business outperformed with 48% growth.
• Cipla: Strong sales in India and other emerging markets contributed to a strong quarter. Sales growth led by trade generics segment that grew 46% over a year earlier.

Metals

• JSW Steel: First consolidated net loss in over six years. Overseas subsidiaries continued to post losses. Net debt-equity and net debt-Ebitda rose sequentially.

Telecom

• Bharti Airtel: Fifth straight quarterly loss. Losses widened due to AGR provisions. Results still above estimates and revenue at its highest in 31 quarters.