Commodities assisting India Inc growth

Companies in commodity sector like Sugar, Tea/Coffee, Chemicals, Cement, Oil exploration, refineries, iron & steel, metals have boosted the corporate performance in Sep 2017 quarter. The sector, which is in a cyclical recovery, posted bottom-line growth of 43.4%. The performance of commodity sector can be gauged from the fact that Nifty commodity index has outperformed Nifty 50 by nearly 5 times between July-Sept 2017. Strong global demand for commodities like metals, natural gas & coal coupled with supply shortage has led to increase in prices.

Looking at the India Inc aggregate standalone numbers, 2,011 companies that have declared results so far, with an improvement in operating profit in Sep 2017 quarter compared to June 2017 quarter. The operating profit grew to 6.65% in Sep 2017 quarter compared to a decline of 3.21% in June 2017 quarter. Even in terms of net profit (bottom-line) growth, India Inc seems to be improving as the fall in net profit growth has reduced to -7.8% in Sept 2017 compared to a reduction of -17.6% in June 2017 quarter.

However, the performance of India Inc deteriorates if commodity companies are excluded from the aggregated numbers. After removing 260 commodity companies, the remaining companies aggregate operating profit growth reduced to 2.71% in Sep 2017 quarter. Moreover, net profit growth (bottom-line) deteriorated to -18.4% in Sept 2017 quarter compared to -15.9% in June 2017 quarter.