Tuesday, February 05, 2013

A grand, glitzy but shallow show

A 34% rise in India Inc.’s Q3 profit may bring smiles to many, but it’s nothing more than a statistical jugglery of an ultra-low base founded in the third quarter of FY2009. Though things have started looking better, India Inc. still has miles to before they can really celebrate by Deepak Ranjan Patra

“This has been a good quarter for Dabur with all-round improvement. We sustained good growth momentum across key consumer categories and geographies... Revenue from key categories is scaling up along expectations and costs are being better managed… The business outlook for our company continues to be robust.” These very words said by a visibly confident Sunil Duggal, CEO, Dabur India indicate how the last quarter has boosted the company’s confidence. But the question remains: does it represent India Inc.’s sentiment as a whole? Well, by and large, yes! After all, gauged on a year-on-year basis the last quarter was the best for corporate India since the day when Lehman Brothers collapsed. But Dalal Street is still apprehensive, raising some food for thought.

Validating the talks about the green shoots of recovery, 467 companies of the BSE 500 constituents (results declared till February 12, 2010) posted a cumulative net profit of Rs.661 billion, up by a sound 34% from profit after tax of Rs.493 billion recorded by the same companies in the year-ago period. Top line of these companies also swelled to Rs.6.78 trillion as compared to Rs.6.02 trillion in the corresponding year of the previous fiscal. While the rise in profit is more than what experts at the market place expected, growth of 12.5% in revenues is more in line with the market estimations. With India Inc. flaunting its superb result card after a relatively longer period, it certainly should have been a party time for many. But surprisingly the one which matters- Dalal Street, has shown little interest in these results.

Since the day the results season kick started in January, the Bombay Stock Exchange benchmark index, Sensex dipped over 8% from a closing of 17,526 on January 11 to 16,038 at the closing of the market on February 15. The advocates of the green shoots theory would certainly blame it to the global cues. But is not a fact that India Inc.’s performance also gets affected by those so called ‘global cues’ (read: US unemployment rate, burgeoning US fiscal deficit, debt crisis in Greece, weak housing sector, sluggish growth in consumer spending in the US…)? Nevertheless, while we are flooded with concepts all around, it’s no surprise that the markets care less about hedging, inventory costs and interest cycle... and so on! They simply weigh the companies on one parameter – real performance, not just results dressed to look good.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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