Q1 Earnings Review: Worst Performance In At Least Three Years
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Q1 Earnings Review: Worst Performance In At Least Three Years

Nearly half of Nifty 50 companies missed estimates in the quarter ended June, the worst performance in at least three years, as a prolonged slowdown in the economy, poor asset quality at lenders and currency fluctuation weighed on their earnings.

Earnings of 23 companies fell short of forecast in the April-June period, the highest since September 2016, data compiled by BloombergQuint showed. Only seven companies, or 14 percent of the Nifty 50 constituents, managed to beat estimates—also the lowest in at least a year—while 20 met forecasts. BloombergQuint has been tracking the earnings expectation-versus-performance data of Nifty 50 stocks since the second quarter of 2016-17.

The quarter saw more downgrades than upgrades with sectors like automobiles and banking not doing well, Mihir Vora, chief investment officer at Max Life Insurance, told BloombergQuint. “The weak commentary may also ensure downgrades for the second quarter.”

UBS analyst Gautam Chhaochharia said the street’s earnings expectations are at 26 percent for the ongoing financial year and 19 percent for the fiscal ending March 2021. The brokerage, however, pegs the number much lower at 15 percent for FY20 and 16 percent for FY21, he said in a note.

Here’s how the sectors have fared in the three months ended June:

Q1 Earnings Review: Worst Performance In At Least Three Years


  • Hero MotoCorp Ltd. was the only automaker among Nifty constituents that met estimates, while the rest missed forecasts.
  • Lower volumes and negative operating leverage impacted margins for the sector.
  • Since auto parts makers are now focusing on clearing dealer inventories auto manufacturers expect lower volumes in the second quarter as well.
  • Companies are hopeful that the government’s initiatives and the upcoming festive season will aid growth in the second half of this financial year.

Auto Ancillaries

  • Auto parts makers are the obvious victims of the sales slowdown. Utilisation rates and margin of component suppliers have dropped in the first quarter.
  • This month, Minda Corporation Ltd., Bosch and Jamna Auto Industries Ltd. have shut plants to lower factory inventories and adjust production as demand falls.


  • InterGlobe Aviation Ltd. and SpiceJet Ltd. reported their highest ever operational numbers in the first quarter aided by higher ticket prices, rise in passenger growth and adoption of new Ind-AS 116 accounting standard. The shutdown of Jet Airways (India) Ltd. aided the financials of these airlines.


  • Poor asset quality and higher provisions marred the performance of Indian banks in the first quarter. The lenders also maintained a cautious outlook for the year.
  • State Bank of India’s slippages were higher than expected. It also lowered its guidance for return on assets for the ongoing financial year.
  • Earnings of ICICI Bank and HDFC Bank met estimates. While HDFC Bank remained cautious on its unsecured retail book, ICICI Bank offered no guidance for loan growth given a weak macroeconomic situation.
  • Axis Bank and Kotak Mahindra Bank missed estimates. While for Kotak Mahindra Bank it was due to a weak trend in subsidiaries, Axis Bank reported higher stressed accounts and provisioning.
  • IndusInd Bank beat expectations on lower provisioning. Its margin came in at more than 4 percent during the quarter.
  • Yes Bank Ltd. continued the “bad loan clean-up”. Its profit fell 90 percent as slippages jumped nearly twofold over the preceding quarter.
  • RBL Bank met forecast but stress in its corporate book over the next two to three quarters spooked sentiments.
  • DCB Bank missed estimates as bad loans rose. The bank remains cautious in corporate lending where its book shrunk 13 percent.

Non-Bank Financial Companies

  • HDFC Ltd. and Bajaj Finance Ltd. reported higher profit during the quarter. Bajaj Finance’s disbursements fell on stricter lending criteria.
  • Bajaj Finserv Ltd. took a hit because of its exposures to Dewan Housing Finance Corporation Ltd. (DHFL) and Infrastructure Leasing & Financial Services Ltd (IL&FS).
  • Indiabulls Housing Finance Ltd., Mahindra & Mahindra Financial Services Ltd. and L&T Financial Services Ltd. missed estimates on higher provisioning. Bad loans rose for Indiabulls and M&M Finance.
  • Disbursements remained sluggish for Shriram Transport Finance Company and Shriram City Union Finance. Their asset quality was stable.


  • Higher prices and cost optimisation boosted earnings of cement makers in the first quarter.
  • Most of the companies beat estimates despite weak volume growth on account of slower construction activities.

Construction And Capital Goods

  • Larsen & Toubro Ltd. maintained its guidance for the year but expects subdued private sector capex in the next few quarters.
  • Bharat Heavy Electricals Ltd. faced stress on execution and working capital levels as it reported an operational loss in the quarter ended June.
  • Cummins India Ltd. cut its domestic and export revenue guidance on lower demand. Siemens Ltd. and Thermax Ltd., too, pointed toward a slowdown in the near term.

Consumer Durables

  • Air conditioner makers performed well during the quarter on the back of higher sales and low base.
  • Sales of wiremakers fell sequentially.
  • Margin of LED makers remained under pressure due to intense pricing competition.

Fast-Moving Consumer Goods

  • Revenue growth of all consumer goods makers fell in the quarter ended June as Indians bought fewer biscuits to shampoos.
  • Hindustan Unilever Ltd.’s volume growth fell to lowest in seven quarters. But Nestle India Ltd. and Dabur India Ltd. were the only exceptions as their net sales growth was higher.
  • There is a marked slowdown in the rural segment and its growth is now on par with urban.
  • Still, operating margins improved for most companies on the back of benign input costs.

Home Improvement

  • Earnings of tile and ceramic makers missed estimates despite robust volume growth.
  • Revenue and margin guidance lowered on account of sluggish demand.
  • Weak topline and fall in realisations hurt margins despite lower power and fuel costs for tilemakers.
  • Plywood companies, too, missed forecast owing to sustained weakness in demand. Pidilite Industries Ltd. was the only exception. Its management remains optimistic on the demand outlook.

Information Technology

  • Revenue growth remained intact and in line with consensus expectations on the back of new deals.
  • Firms said clients, however, have been tight-fisted while allocating new expenditure towards IT spends, and there has been a delay in decision-making.
  • Digital business continued grow at a faster pace.
  • Operational profits fell sequentially because of higher visa costs, strong rupee and wage costs.


  • Most steelmakers met estimates during the quarter.
  • Lower realisations and higher raw material cost led to a drop in profit of JSW Steel Ltd. and Tata Steel Ltd. Their public investment spend fell due to weak sentiment in automobile and consumer durables segment.
  • Subdued performance of aluminium and zinc weighed on Vedanta Ltd.’s earnings.
  • Novelis Inc. offset the weak India performance of Hindalco Industries Ltd.
  • Higher fuel supply agreement realisation and stable employee costs led to higher profits for Coal India Ltd.

Oil & Gas

  • Oil and gas companies largely met forecasts in the first quarter.
  • The upstream companies benefitted from higher crude and gas prices, while the downstream financials were marred because of higher inventory losses.
  • City gas distributors beat expectations on account of higher volumes.


  • Paintmakers were perhaps the exception amid the consumption slowdown.
  • Double-digit volume growth in domestic decorative paints business, aided by inventory buildup ahead of the festive season, and low base led to their growth.
  • Lower raw material costs and price hikes aided margins.
  • Companies, however, remain cautious on demand.


  • Lower R&D costs supported margins of most drugmakers.
  • While Sun Pharmaceutical Industries Ltd. beat estimates, restructuring of India business hurt Cipla Ltd.’s earnings. Brokerages cut their target price for Cipla on weak India performance.
  • Lower North America sales and weaker performance of pharma services, active ingredients and proprietary products segments dented financials of Dr. Reddy’s Laboratories Ltd.


  • Most power utilities met estimates in the first quarter after adopting the Central Electricity Regulatory Commission’s new tariff norms.
  • Stressed power assets, however, remained a concern for the industry.
  • Transmission losses accumulated for both private and public power firms.
  • Coal inventory, too, piled up, while plant load factor and generation remained flat.

Real Estate

  • Revenues were higher on account of adopting Ind-AS 115 accounting standard.
  • Revenue from commercial properties remained flat for mall developers amid the slowdown in the economy.
  • Liquidity crunch continued to hurt.
  • Top companies may consolidate to gain market share; smaller developers exiting the market due to liquidity crisis.


  • Vodafone Idea Ltd. continued to lose subscribers and its revenue declined in the quarter ended June.
  • Operating profit of Bharti Airtel Ltd. rose as fewer customers exited its network, number of data subscribers increased and higher average rental per user.
  • Reliance Jio Infocomm Ltd.’s ARPU fell for the seventh straight quarter.

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