India Inc’s net profit jumps 67%; low base helps: Care

The third quarter corporate performance demonstrated a return of demand after four quarters of negative sales growth and three quarters of negative net profit growth.

However, the robust corporate performance is also a function of low base effect due to negative growth in the corresponding quarter last year, said a report by Care Ratings.

Its assessment of the corporate performance for Q3 FY21 is based on a sample of 2,450 companies.

Net sales recorded a growth of 2.7 per cent in Q3FY21 compared with marginal fall of 0.8 per cent in the corresponding quarter last year.

The net sales of 2,062 companies (excluding banks and finance) have also registered a growth of 2.4 per cent during Q3FY21 compared with a decline of 3.8 per cent in Q3FY20. Therefore, sequentially net sales have improved after recording negative growth in Q1 and Q2FY21.

"However, one needs to read the positive growth number in Q3FY21 with caution owing to the low base effect," Care said.

"Corporate performance in Q3FY21 has been robust as reflected by a marginal uptick in net sales and strong growth in net profits. Improved consumer sentiments, festive season demand, further relaxations in the restrictions coupled with cost rationalisation in some expenditures have been the key factors leading to a strong rebound in corporate earnings in Q3-FY21 compared with the previous two quarters," said Sushant Hede, associate economist, Care Ratings.

"Despite the improvement in net sales at the aggregate level, there are some industries like hotels/resorts/restaurants, diamond & jewellery, airlines, shipping, oil exploration, paper products, among others, which have recorded a double-digit fall in net sales during Q3FY21.

"Net profits of 2,450 companies have seen a profound improvement of 67 per cent in the quarter ended December 2020 on the back of improvement in net sales coupled with cost rationalisation in some expenditures like raw material costs, power cost, interest cost," it said.