Q2 Results: India Inc. To Report 14% Earnings Growth, Citi Says
Pedestrians walk past an electronic ticker board displaying stock figures for Tata Steel Ltd., from left, Tata Consultancy Services Ltd. (TCS), and Wipro Ltd. at the Bombay Stock Exchange (BSE), center, in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Q2 Results: India Inc. To Report 14% Earnings Growth, Citi Says

India Inc.’s earnings growth is expected to improve in the quarter ended September even as individual sectors are expected to report a mixed set of numbers, according to Citi Research.

Earnings are expected to grow 14 percent in the second quarter of 2018-19 compared with 12 percent in the first, according to Citi Research's quarterly report on earnings expectations. “Earnings are likely to see benefit from rupee depreciation in information technology or pharmaceuticals while low-base is expected to benefit financials,” the report said. “Earnings for autos, healthcare, industrials and telecom sectors are likely to be weak.”

While the overall quarter will be steady, investors should keep an eye on management commentary and trends on crude oil price, it added.

The Nifty 50 companies have started announcing results for the quarter ended September, with Zee Entertainment Ltd. being the first on Oct. 10. Hindustan Unilever Ltd. will announce its numbers today.

Here's what the report said about the various sectors:


Domestic business for India’s pharmaceutical companies is likely to have a “difficult” quarter due to the restocking seen after GST last year, said Prashant Nair, deputy head of India Research, Citi.

“But the rest of the business for most companies should do well mainly because the currency has moved the way it has and pricing in the U.S. has seen some stabilising as well,” he said.

Citi expects Aurobindo Pharma Ltd. to do well well this quarter while Lupin Pharmaceuticals Ltd. is expected to show a weak set of earnings numbers.

  • Expect modest growth in domestic formulation business

Look out for:

  1. Commentary on compliance issues,
  2. Cues on U.S. pricing,
  3. Commentary on product pipeline


Corporate banks are expected to report muted earnings growth in the second quarter, said Manish Shukla, director at Citi Research.

“IBC cases are being dragged on in court, so things will be muted in terms of recovery but at the same time, quarter-on-quarter, the margins should be flat or up because the MCLR cuts that the banks have been taking should start flowing through to the P&L (profit and loss),” he said.

  • Expect improvement in asset quality
  • See muted NPA recovery
  • Expect margins to remain stable
  • Improvement in loan growth
  • Retail lending to aid growth
  • Asset and capital issues may hurt public sector banks
  • Kerala floods may impact select players


The liquidity concerns for the NBFC sector are unlikely to manifest in the earnings for the quarter ended September, said Manish Shukla, director at Citi Research, since most of the pressures started cropping up in the last week of the month.

“While the second quarter numbers will be decent, there will be a lot of focus on management commentary going into the third quarter around how the funding lines are shaping up, and whether the banks are lending or not lending,” he said. “We believe it’s better to go with better quality names that have strong parentage or a strong demonstrated track record.”

  • To focus on ALM profile & liquidity
  • Cost of funds likely to rise
  • Growth trends will vary


  • Cross-currency headwinds will impact dollar revenue growth by 80-100 basis points quarter on quarter
  • Forex losses will be offset by translation gains
  • Legacy business may be under pressure

Consumers Discretionary

Consumer discretionary companies will see a moderation in their headline numbers when compared with those seen last quarter, said Aditya Mathur, analyst at Citi Research. Companies like Dabur Ltd. and Hindustan Unilever Ltd., however, are expected to be at the top end with a high single-digit or double-digit volume growth.

"On the other hand, we have companies like Emami Ltd., where we think there won't be any great growth this quarter to talk about. Colgate will also be at the lower end of the spectrum,” he said.

  • Waning low base effect
  • Margins may moderate
  • Advertising & promotional spend spends may rise


  • Do not expect strong earnings for original equipment manufacturers, given the one-month shift in festive season
  • Expect cost pressures for tyre companies
  • Exide Industries could benefit from benign lead prices

Also read: All You Need To Know Going Into The Second Quarter Earnings Season

Citi Disclosures

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