First, let us look at a macro summary of how the results panned out for Jun-21 quarter.
Macro picture: How the P&L Account of India Inc looked like?
Interestingly, you get two different sets of pictures when you look at the performance on a yoy basis and later on a sequential qoq basis. Let us look at the more encouraging yoy basis first. Overall sales revenues for the universe of Indian companies was up 48.9% on yoy basis, but that was largely on account of the low base in the Jun-20 quarter in the midst of the first round of COVID. Gross profits are up 85% yoy, which is appreciable considering that most of the industries like autos, chemicals, heavy equipment saw spike in input costs.
On a yoy basis, net profits are up more than 5-fold or 417% to be precise. This is again a result of the base effect, but there are two specific factors at play. Firstly, the spike in gross profits indicates how costs have been curtailed post the pandemic. Secondly, the fall in interest rates led interest costs 8.5% lower on a yoy basis.
Let us turn to the slightly more challenging sequential performance. Compared to the Mar-21 quarter, sales revenues were down 6% while other income was down 35%, largely due to lower treasury gains. The pressure of higher input costs was visible in the qoq numbers as gross profits fell by 8.1% over Mar-21 quarter. Net profits on sequential basis were down sharply by 14.5% as higher input cost and lower fixed cost absorption hit numbers.
To be fair, the sequential fall in sales and profits was on account of COVID 2.0. Hence, one can safely assume this would be a temporary phenomenon and growth should return in the Sep-21 quarter, unless input costs spike beyond acceptable levels.
How sectors performed on a yoy basis?
Here are highlights of various sectors in the Jun-21 quarter compared to Jun-20 quarter.
• On a yoy basis, if you look at top line revenues, almost all sectors did better on the back of the low base effect. The big sales growth candidates in the Jun-21 quarter were Automobiles, Oil & Gas, Gems & Jewellery, Metals & Mining, real estate and shipbuilding; all of them recording above 100% yoy growth.
• The only exception to this list was banking, which saw revenues fall by 3.5% on yoy basis, largely due to lower interest and investment income on account of falling interest rates in the economy and lower weighted average yield on assets.
• On yoy net profit comparison, majority of the sectors saw a spurt in net profits. However, there some exceptions and this was true about sectors that bore the brunt of COVID 2.0. Profits of sectors like Aviation, NBFCs, logistics and retailing where sharply lower even on yoy basis due to being high contact businesses.
How sectors performed on a sequential QOQ basis?
Here are highlights of how sectors performed in Jun-21 quarter compared to Mar-21.
• On a QOQ basis, the top line revenues were lower for most industries. The worst hit were sectors like aviation, consumer durables, hospitality, automobiles & ancillaries, real estate and retailing. In all these cases, the restrictions imposed by COVID 2.0 meant significant impact on business activity.
• However, there were some exceptions to this top line trend. For example, software saw revenues up 4.9% and pharma revenues grew 9.5% on sequential basis on the back of robust demand and being largely non-cyclical. Two other sectors that saw growth in top line were chemicals and hydrocarbons. While chemicals gained from the ban imposed by China, oil & gas benefited from robust crude prices.
• Let us turn to the bottom line story on a qoq basis. Here are the profit laggards; and they are the standard suspects. Aviation and consumer durables took deep cuts in profits as revenues were insufficient to absorb costs. Automobiles and capital goods also saw deep cuts in profits due to a sharp spike in input costs in the quarter. There were also some profit growers in the quarter. Metals and mining companies grew profits on better pricing. Healthcare and IT also expanded profits on robust demand. Chemicals and real estate sector saw profits grow on qoq basis.
The sequential performance has posed some stiff challenges in the Jun-21 quarter, but the picture is a lot better than originally painted by sceptics. It looks like a temporary aberration before things normalize. For that we have to wait for the Sep-21 quarter.