A recovery in earnings remains elusive for India Inc with the profit after tax (PAT) of companies that form part of the Nifty falling 9.8 per cent year-on-year (y-o-y) to around Rs 73,000 crore for the quarter ending June (Q1) of 2017-18, the lowest in the last nine quarters.
Companies that constitute the benchmark Sensex reported a 4.3 per cent y-o-y decline in PAT to about Rs 56,000 crore.
The poor performance was due to GST-related destocking in several consumer-oriented sectors such as automobiles, FMCG (fast moving consumer goods), healthcare and consumer durables, observers said.
"Destocking-driven volumetop-line miss exacerbated the impact at EBITDA (earnings before interest, taxes, depreciation and amortisation) level," said Gautam Duggad, head, research, Motilal OswalBSE 1.56 % Securities. Several companies compensated dealers-distributors for the taxation hit due to GST, he said.
"GST has impacted (earnings) more than the expectations. It has affected input suppliers more as manufacturers directly told them to delay supplies," said G Chokkalingam, founder and managing director, Equinomics Research and Advisory .
"The performance (during Q1) makes the FY18 earnings recovery thesis that much more challenging," Duggad said. "We expect GST-related volatility to continue even in 2QFY18 (second quarter of 2017-18) before the low base of demonetisation in 2HFY17 comes to the rescue," he said.
"Defensive sectors have been worst affected (in Q1)," Chokkalingam said. Pharma, IT, telecom and tyre sectors were among those that posted poor earnings, he said. While 25 companies in the Nifty-50 reported PAT that were below estimates, 13 firms reported PAT that were above estimates. Earnings of only 12 companies were in-line with estimates.
Investment & trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance. CapitalStars Investment Adviser: SEBI Registration Number: INA000001647
