Sensex cos’ Q2 net rises just 6%

MUMBAI : Despite huge expectations of a turnaround in the economy and the corporate sector, actual profit numbers of India Inc are yet to show any pickup. During the quarter ended September 2014 (Q2FY15), net profit of the sensex 30 companies showed a muted growth rate of just 6% on an annual basis, compared to 19.3% during the previous quarter, that is in Q1FY15, an analysis by Kotak Institutional Equities showed.
The broking house expects the sensex 30 companies together to report a 10.7% rise in net profit for FY15, compared to a growth rate of 13.8% in FY14. It also expects the recovery in corporate profitability to take 2-4 more quarters.
According to Kotak analysts, one of the worrying trends during the last quarter was the higher slippages reported by public sector banks, while some of the private sector banks — like Axis Bank, ICICI Bank and J&K Bank — also joined the pack.
The report pointed out that latest data indicated that some power generation facilities were facing difficulties. “The Indian banking system runs the risk of a further increase in restructured loans and NPLs (non-performing loans) in the power sector.”
Kotak Institutional Equities recognizes that current stock valuations are at an elevated level and believes that these valuations are a reflection of investors’ confidence in a recovery in corporate revenues and profits in the medium term. “We do not dispute the medium-term potential on investment in India, but suspect that revenues will continue to be weak for the next few quarters. The confidence of companies expecting a recovery in (the second half of FY15) seems to have waned with many companies now painting a more muted outlook for the next few quarters,” the report noted.