Q4 Earnings Preview: India Inc. Stares At A Muted Quarter Amid Virus Outbreak
A financial trader reacts as he works at his computer screens at the Frankfurt Stock Exchange. Photographer: Ralph Orlowski/Bloomberg

Q4 Earnings Preview: India Inc. Stares At A Muted Quarter Amid Virus Outbreak

Most analysts expect India Inc.’s earnings to drop in the quarter ended March as the new coronavirus pandemic shut businesses temporarily.

Kotak Institutional Equities expects net profit for the brokerage’s coverage universe to decline 14 percent year-on-year (drop 36 percent year-on-year excluding banks/finance) in the fourth quarter as economic activity weakened sharply in March on account of the Covid-19 outbreak. “We expect high double-digit year-on-year decline in net income for sectors such as automobiles, construction materials, metals and mining and oil, while banks and pharmaceuticals to report healthy earnings,” Sanjeev Prasad, co-head at the brokerage, said in a note.

Prasad also said the performance of Sensex would be better than the Nifty as companies such as Tata Motors Ltd., Bharat Petroleum Corporation Ltd. and Indian Oil Corporation Ltd., which are part of the 50-stock gauge, are expected to report sharp decline in profits. “We expect net profits for the BSE-30 Index to increase 12 percent year-on-year and that of the Nifty 50 Index to decline 16 percent year-on-year”.

According to Axis Capital, the onslaught of Covid-19 and the unprecedented lockdowns have altered the trajectory of economies and businesses worldwide. “The impact is expected to be worse than the 2008 financial crisis and our fourth quarter estimates are already seeing this,” the brokerage said in a note.

For its universe of 180 companies, Axis Capital expects revenue, earnings before interest, tax, depreciation and amortisation, and profit after tax to drop 6 percent, 8 percent and 12 percent year-on-year, respectively, for the three months ended March. Only banks and information technology sectors are likely to post double to high single-digit earnings growth, while engineering, fast-moving consumer goods makers and pharma companies are expected to see low single-digit growth, it said in a report.

Wipro Ltd. will kick-off the fourth-quarter earnings season from April 15. Tata Consultancy Services Ltd. will be the first Nifty 50 company to declare results on April 16.

More than two-thirds of Nifty 50 companies either met or beat estimates for operating income in the quarter ended December 2019. The Nifty companies are reviewed based on their operating income that excludes one-offs. BloombergQuint has been tracking the estimates-versus-performance data of Nifty 50 stocks since the second quarter of 2016-17.

IDFC Securities, too, estimate a 9.7 percent year-on-year decline in profit after tax within the brokerage’s coverage universe on account of weak commodities and Covid-19-induced lockdown impact on demand as well as supply chains. “We expect to see a fairly segmented performance this quarter where essential products (FMCG and pharma) are expected to hold up fine, while discretionary consumption and commodities are expected to take the worst hit,” it said in a note.

The forecast for a muted fourth quarter comes as India went into the world’s biggest lockdown to combat spreading of the highly contagious pathogen. Domestic equities tracked the worst global selloff in more than a decade before recovering some losses as large economies started announcing stimulus.

Ambit Capital, however, said near-term estimates today mattered little. This, according to its report, is based on two observations—for services exporters this is very different from the Global Financial Crisis, and many 10-12-year-old lending institutions are facing “moment of truth”. The brokerage built in “very weak FY21 outlook for most sectors with gradual recovery in FY22”.

Key Highlights For Q4

  • Business lockdown due to coronavirus
  • Both exports and domestic businesses affected in fourth quarter due to global lockdown
  • Rupee trades at all-time high against the dollar
  • One-time impact of BS-VI losses for automakers

Here’s a sector-wise analysis on how India Inc. is expected to perform in Q4 2019-20.


  • Lower volumes due to plant shutdowns amid the coronavirus outbreak
  • One-time impact of BS-VI losses
  • Auto ancillaries are also expected to be impacted due to plant shutdowns
  • Gains from lower commodity prices to be offset by negative operating leverage
  • Pricing trends remained weak throughout the quarter
  • Inventory correction drags fourth dispatches, especially for two-wheeler makers


  • Grounding of aircraft due to nationwide lockdown may lead to losses and dent revenue spreads
  • Lower oil price is the only silver lining

Agro & Chemicals

  • Export-based companies will benefit due to China shutdown issues
  • Companies catering to sectors such as automotive, consumer durables and electronics will be impacted


  • Moratorium on loan repayment will be keenly watched
  • Large banks likely to post steady net interest income growth on stable loan growth
  • Smaller banks to report muted NII growth on weak loan and deposit growth
  • Lower operating growth as fee growth hit by lockdown
  • Housing finance companies to report muted financials on realty slowdown
  • NBFCs’ growth and assets under management to be impacted due to lockdown
  • Small finance banks may also be impacted due to lockdown
  • Banks focusing on card spends, bancassurance, retail disbursements will be more affected

Capital Goods & Engineering

  • Factory shutdowns to hit execution, revenue-booking and order finalisation
  • Weak execution and negative operating leverage to hit margin
  • Sharp rupee depreciation will negatively impact margin on net importers


  • Demand remained buoyant for a major part of the fourth quarter
  • Volume is expected to decline as constructions halted amid lockdown
  • A sequential decline in pet coke and thermal coal prices will aid margins


  • Top line is expected to take a hit due to weak demand amid lockdown
  • Essentials like homecare and staples to fare much better than discretionary categories
  • Volume is expected to decline as supply chain got disrupted amid lockdown
  • Lower commodity costs will aid margins

Information Technology

  • Global lockdown to impact deal ramp ups and blended realisation in fourth quarter
  • Operating margin to expand as rupee depreciated, savings on travelling and other costs
  • Management commentary important as Accenture and Cognizant have revised guidance


  • Broadcasters ad spends will be hit due to lockdown
  • Over-the-top players may benefit due to lockdown
  • Multiplex and hotels to be impacted as operations were shut
  • Cancellation of tourist visas and national lockdown will dent hotel revenues

Metals & Mining

  • Realisations, profitability and volumes are expected to decline for metal companies
  • A sharp fall in most commodities globally will impact financials of non-ferrous companies
  • Ferrous companies will be in better position as steel prices have been resilient

Oil & Gas

  • Lower oil prices and fall in global production to impact oil companies
  • Lower realisation for upstream companies and inventory loss for downstream companies
  • Moderation in volumes amid lockdown will impact gas companies

Pharma & Healthcare

  • Exporters to benefit due to rupee depreciation but lack of new approvals will keep growth muted
  • Domestic pharma companies to benefit due to some pre-buying amid Covid-19 lockdown
  • Hospitals to see sharp drop in occupancy and volumes due to the virus outbreak
  • Diagnostic companies to see sharp decline in volumes due to lockdown


  • Lockdown will impact demand for power companies
  • Margins may benefit due to lower coal and gas prices

Real Estate

  • Weakness of past few quarters to continue
  • Vacancy levels for commercial real estate expected to rise
  • Companies with hospitality and mall portfolios to be impacted


  • Revenue is expected to grow for telecom companies due to price hikes
  • Margins will be better due to pass through of price hikes to customers

(The reasons have been compiled from research reports of Axis Capital, BofA Securities, Kotak Institutional Equities, Investec, Goldman Sachs, Citi Research and Ambit Capital, among others.)

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