Early numbers for India Inc’s March earnings season indicate fairly good performance, but second surge casts a pall

To be sure, the sample is heavily stacked in favour of well-performing IT companies, but others haven’t done too badly either.

The first lot of numbers from India Inc this earnings season—early birds—show companies have done fairly well. With supply chains restored and some amount of pent-up demand waiting to be satiated, the March quarter seems to have been a good one. To be sure, the sample is heavily stacked in favour of well-performing IT companies, but others haven’t done too badly either.

Revenues have grown smartly on the back of better volumes and strong realisations—two-wheeler makers, for instance, have raised prices and also sold a better mix of products. A key trend is that companies continue to cut costs and eke out efficiencies wherever they can; Ambuja Cements, for instance, has reported strong margins with the cost per tonne falling 4% y-o-y.

To be sure, several businesses were hurt by the rising raw material costs; gross margins at Hindustan Unilever, for instance, contracted 117 bps y-o-y, and at Maruti Suzuki, a bigger raw materials bill ate into profits. However, overall a much smaller increase in expenditure of just 11% y-o-y compared with a 16%-plus rise in revenues has ensured that operating profit margins—collectively for 139 companies—expanded by a chunky 400 basis points y-o-y.

The stars so far have been the software services companies, who not only reported remarkable numbers but also announced they had strong deal pipelines that would ensure good revenue growth in FY22. The commentary from consumer-facing businesses has been expectedly cautious, given the damage being caused by the ferocious second wave of the pandemic.