Q3 earnings....

The December quarter has been a “no show” for most of India Inc. Profit after tax (PAT) for 29 out of 30 sensex companies declined 12% while earnings before interest, tax, depreciation and amortisation (EBITDA) margins at 15% was the lowest in 23 quarters for BSE-500 companies. Quarterly PAT growth for the group declined 29%, the worst performance since June 2003. Though companies have been facing pressure on the profitability front for some time now, sales growth too has become rather muted. Sales for 29 out of 30 sensex companies grew a mere 3.7% to Rs 1,60,750 crore, the data shows. PAT for the group declined 12% to Rs 26,890 crore. Sales growth for BSE-500 companies, which picked up during the last three quarters, slowed down significantly. Aggregate EBITDA margins for sensex companies fell by 330 basis points (bps) during the quarter while PAT margins declined by 300 bps. “The third (December) quarter results has been the worst in almost five years,” reckons Mridul Saggar, chief economist, Kotak Securities. Corporate earnings would continue to be bad for some time but sales growth would revive soon, he says. “The pain would be there for the next six months. We expect corporate earnings to improve in the second half of next fiscal,” says Harsha Upadhyaya, vice president and fund manager, UTI Mutual Fund. The breadth of earnings growth has also deteriorated. An analysis of stocks of companies by brokerage firm Motilal Oswal Securities shows that the proportion of companies with negative earnings growth increased from 20% to 45% in the last one year. Only 35% of companies recorded an earnings growth of over 15% in the last quarter compared to the 67% that reported growth in the same period last year, the analysis shows. Large-cap companies have weathered the slowdown storm better than their mid-cap counterparts. While earnings have declined 6% on a year-on-year basis for large-caps, it has slumped 26% for mid-caps for the same period. Earnings contribution from large-caps has increased by 390 bps in the last 12 months. “We expect this to rise further over the next few quarters,” analysts say.