‘Cor­po­rates may re­port dip in prof­its for sec­ond quar­ter’

Financial Chronicle - - DEEP DIVE - VVLN SASTRY DI­REC­TOR FIRSTCALL IN­DIA IN­VEST­MENT BANK­ING

THE ex­pec­ta­tion in terms of earn­ings for the sec­ond quar­ter of the fis­cal year 2018 con­tin­ues as be­fore as that of the past 3 quar­ters. Banks and com­mod­ity com­pa­nies are prob­a­bly go­ing to ben­e­fit from base im­pacts. Bar­ring the tech­ni­cally driven growth, there is no much rea­son for the bank­ing in­dus­try to cheer about as the re­cap­i­tal­i­sa­tion still has to hap­pen and NPAs are still a big prob­lem.

Weak de­mand and rise in in­put costs may spoil the other sec­toral growth trends. Manufacturers and IT com­pa­nies are likely to face the brunt due to the dis­rup­tion on ac­count of the GST, lack­lus­tre de­mand, and in­crease in in­put costs. Engi­neer­ing com­pa­nies are also go­ing to show slow­down due to de­lay in ex­e­cu­tion of projects.

Con­sumer goods com­pa­nies are ex­pected to re­port sin­gle-digit growth in both top and bot­tom-line. Tele­com com­pa­nies and pharma com­pa­nies are likely to be lag­gards and ex­pected to re­port a steep de­cline in their net profit. How­ever, the ag­gre­gate net profit of Nifty com­pa­nies is ex­pected to de­crease by 1.5 per cent YoY dur­ing the quar­ter, against three per cent growth in the June 2017 quar­ter and 8.25 per cent growth in Q2 of the last fis­cal year. This de-growth is after ex­clud­ing the com­mod­ity com­pa­nies and banks.

Over­all, the con­sumer spend­ing in both re­tail and in­dus­trial sec­tor has been dras­ti­cally af­fected lead­ing to slug­gish de­mand trend across the sec­tors. In the ab­sence of pri­vate and public sec­tor spend­ing, the con­sump­tion growth is not en­cour­ag­ing. The in­creased com­pli­ances on ac­count of GST are a big drag on cor­po­rate. The busi­ness en­vi­ron­ment is caught up with full of com­pli­ances, reg­u­la­tory follow-ups etc. Re­trench­ment in sev­eral sec­tors is a re­al­ity and in­crease in un­em­ploy­ment goes with­out a doubt. The eco­nomic fringe sud­denly caught up with the smooth econ­omy oth­er­wise. The whole in­dus­try is pa­tiently wait­ing with a hope and ju­di­ciously adopt­ing the struc­tural changes.

The con­sumer spend­ing in both re­tail and in­dus­trial sec­tor has been dras­ti­cally af­fected lead­ing to slug­gish de­mand trend across the sec­tors

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