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Corporate India’s profits have surged in the three months to March driven up by strong top line growth and some hefty cost-cutting. Producers of commodities, especially metals like steel, have seen their sales boosted by rising prices and good demand; net sales at Tata Steel jumped 39% year-on-year, nudging Rs 50,000 crore. A big jump in exports and an increase in local realisations of two-wheeler companies have helped increased their sales.
At Bajaj Auto, motorcycle volumes in the export market increased by 24% y-o-y and the mix too improved. Demand in the home market, too, was reasonably strong.
Revenues at Maruti Suzuki increased by 32% y-o-y led by a big jump in volumes and a 4.5% y-o-y increase in ASPs (average selling prices). Discounts on vehicles have come down significantly to Rs 16,600 per vehicle in Q4FY21 versus Rs 19,051 a year ago as demand has picked up. Standalone revenues at Ultratech Cement increased a smart 35% y-o-y with sales volume up 30% y-o-y and capacity utilisation hitting 93% y-o-y.
The stars of the fourth quarter earnings season have been the IT services firms which have turned in stellar numbers. For a sample of 227 companies (excluding banks and financials) net sales were up a strong 18% y-o-y. FMCG firms fared well with supply chains largely restored post the lockdown and rural demand holding up: at Hindustan Unilever, underlying volumes jumped 16% y-o-y. Rural demand remains reasonably strong; at Maruti Suzuki, for example, rural volumes accounted for 41% of overall volumes in FY21 which is an increase of 200-250 bps y-o-y.
While sales have, no doubt, been strong, India Inc’s bottom-line continues to be driven as much by cost cuts as it has been in the past three quarters.
For the sample, the total expenditure went up by only 8% y-o-y. At Gujarat Ambuja, for instance, costs declined to Rs 3,688/tonne, a drop of 4% y-o-y on the back of lower material costs, higher use of alternate fuels, better efficiencies in energy consumption and logistics and lower clinker factor. At Tata Steel, expenditure went up just 15% y-o-y while sales increased 39% y-o-y. Consequently, operating profit margins for the sample have expanded 650 points y-o-y pushing up the operating profit by a stunning 73%. While the management commentary from IT software services players has sounded confident and the guidance for FY22 has been encouraging, players catering for the home market, especially the consumer-facing firms have been circumspect. Sanjiv Mehta, MD&CEO,Hindustan Unilever, for instance, observed it would be hard to say how the business would fare in the current quarter given the several localised restrictions due to the ferocious second wave.