Corporate growth revival elusive in Q1

Early birds fall short of Street expectations on sales, profit growth

Revival of the country’s corporate growth, as predicted by earnings estimates of leading brokerages earlier this month, seem elusive as ever.

The combined net sales of 162 companies that have declared their results so far was up 0.5 per cent on a year-on-year (YoY) basis during the April to June period (Q1), down from the 3.8 per cent growth reported by the same set of companies during the January-March 2016 quarter.

Total income (net sales and other income) grew 3.1 per cent in Q1, boosted by a 26 per cent YoY growth in income led by private sector banks and Reliance Industries. (See charts)

Net sales of 11 Nifty 50 companies that have declared their results so far was down 0.1 per cent YoY in Q1, lower than Street expectations of 4.1 per cent YoY growth in their combined net sales of index companies. For banks and financial companies net sales is their net interest income i.e. gross interest income minus interest expenses.

On the brighter side, gains from lower commodity and energy prices are turning out to be stickier than Street expectations. Combined net profit (adjusted for exceptional items) for the sample was up 6.8 per cent YoY during the first quarter, lower than the 16.7 per cent YoY growth in the fourth quarter of last financial year but better than the 1.7 per cent decline reported during the same quarter in the last financial year. Nifty 50 companies in the sample reported earnings growth of 11.9 per cent YoY, better than the Street estimates of a two per cent decline in the combined earnings of index companies during the first quarter.

World Bank President Jim Yong Kim (pictured) said continued uncertainty following the UK’s vote to leave the European Union could hurt global growth. “We actually thought the US was solid, the euro zone seemed to be getting better, even Japan seemed to be doing a little bit better,” Kim told Bloomberg Television on Sunday on the sidelines of the Group of 20 finance ministers and central bankers meeting in Chengdu, China. “Brexit was a big hit, and we’re still trying to understand exactly what the implications are, but it looks like global growth will be disappointing again.” BLOOMBERG<