Earnings growth rises to 6 quarter high

Earnings growth rises to 6 quarter high

India Inc reported strong earnings growth in the December 2017 quarter after declines in the previous two quarters. This was largely expected given the lower base effect due to demonetisation in the year-ago quarter. What’s more encouraging is that some analysts believe that the momentum will continue in the coming quarters. Improved sales volume, ability to increase product prices to pass on higher input costs, better project execution and increasing order books are some of the factors that support the optimism.

In the December quarter, net profit of a sample of 2,043 companies rose to a sixquarter high of 27.5 per cent year-on-year. Net sales rose by 11.5 per cent. In the previous quarter, sales had risen by 8.7 per cent, while net profit had fallen by 1 per cent. The sample excluded banking and finance companies.After excluding oil and gas companies along with banks and finance entities, sales and profit growth in the December 2017 quarter was 8.8 per cent and 25 per cent, respectively.

The performance was driven by a stellar show by consumer-focused businesses. On the other hand, sectors including cement, capital goods, IT, pharma, power, public sector banks and private banks with high corporate exposure and telecom continued to show stress.“Automobile companies reported betterthan-expected performance. Also, the volume growth delivered by consumer-focused companies and market share gains by retail banks were encouraging,” said Sonam Udasi, fund manager, Tata Mutual Fund.

Consumer focused companies reported a strong comeback on the profit front. A sub-sample of 491 from sectors including automobiles, beverages, fast-moving consumer goods (FMCG), hospitality, jewellery, media and entertainment, retail and textiles reported 23 per cent growth in net profit, the strongest in five quarters.

The growth was on the back of a 14.9 per cent drop in profit in the year-ago quarter. Net sales rose by 3.8 per cent, nearly double than the growth of 2.1 per cent in the year-ago quarter.In the case of capital goods sector, while the quarterly performance was less than encouraging, analysts believe a turnaround in visible. “Though the third quarter performance of the capital goods companies was subdued, their prospects look better considering improved order books and better execution,” said Mayuresh Joshi, fund manager at Angel Broking.

The operating margin of the larger sample, excluding banks and finance companies, improved to 16 per cent from 15.2 per cent in the year-ago quarter. Companies in the automobile, lubricant, FMCG, and metal sectors were able to pass on the increase in input costs to consumers by raising product prices. This supported margins,” said Joshi.

Analysts are optimistic about the future course. The March 2018 quarter is also expected to benefit from the low base of the previous year’s comparable quarter. Besides, demand across sectors is expected to pick up.“Things look incrementally better. The growth will likely be better in the March quarter compared with the year ago,” said Udasi.According to Angel Broking’s Joshi, sectors including roads, power, rural housing and finance, and consumption-based companies look promising. “Companies with strong business models will benefit due to the shift towards organised sector from unorganised entities,” he said.

The Economic Times, New Delhi, 15th February 2018

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said. Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm

Credit card spending growth declines on RBI gaze, stress build-up

Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem. “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and

CA Online

Search This Blog