India Inc sinks into the red after 6 years

Excluding finance and software players, 1,002 firms report combined loss of ~2,700 cr in March quarter

India’s mainstream companies, excluding lenders and software services, reported combined pre-tax losses during the JanuaryMarch period (Q4) for the first time in at least 24 quarters. Though India was under lockdown for only seven days of the quarter, global demand and commodity prices began falling from February as Covid-19 was spreading in other countries. As a result, several manufacturers, especially of commodities, reported losses.

Together, these 1,002 listed companies — excluding banks, non-bank lenders, insurers, brokerages, and information technology (IT) firms — reported a combined pre-tax loss of around ~2,700 crore during Q4. These firms had combined profit before tax (PBT) of ~1.06 trillion during Q4 of FY19 and ~1.05 trillion during Q3 of FY19. These firms’ combined revenues declined by 9 per cent year-on-year (YOY) to ~12.33 trillion during Q4 FY20 from ~13.53 trillion a year ago. The contraction in top line was the worst in 18 quarters and third consecutive revenue decline in as many quarters.

The previous low point for these companies was the slump in metal and energy prices in 2014-15 leading to a 9.4 per cent decline in revenues and profits of metals, mining, and energy companies. The current slowdown is, however, causing greater financial pain. For example, these companies’ combined PBT had declined by 24 per cent YOY during Q4 of FY16 but there were no losses at the aggregate level. The dip in revenues was, however, far worse at 9.4 per cent in Q4 of FY15.

Some of the companies with the biggest losses during the quarter included Vedanta (PBT loss of ~15,269 crore), Indian Oil (PBT loss of ~13,610 crore), and Tata Motors (PBT loss of ~9,312 crore). In all, a third (333) of these 1,002 companies reported a pre-tax loss during Q4 FY20, while another 37 per cent (373 firms) reported PBT contraction. The remaining 295 firms bucked the trend and saw an improvement in profitability.

After including the finance and IT firms in the sample, the combined PBT of 1,274 companies was down 81.2 per cent YOY to around ~27,000 crore during Q4 – the worst show in at least six years. In comparison, these companies had reported PBT of ~1.42 trillion during Q4FY19 and ~1.83 trillion during Q3FY20.

Combined revenues including other income and lenders’ fee income was down 5.1 per cent YOY during Q4 at ~17.8 trillion. This was the sharpest decline in corporate