Financial year 2015-16 more or less ended on a subdued note for India Inc., due to a bunch of negative factors such as global economic slowdown, weakening rupee against the US dollar, slumping domestic demands, harsh scrutiny by overseas regulators and a poor monsoon. The 30 Sensex companies are no exception to be hit hard on profitability front. Data shows that 11 of Sensex firms reported a combined net loss of Rs.33,905 crore as against 16 heavyweights posting a combined net profit of Rs.23,525 crore in FY16. Besides, remaining three companies witnessed dramatic turnaround during the year.
Among the Sensex pack, the Mukesh Ambani-led Reliance Industries led from the front with highest net profit in absolute term at Rs.4,698 crore; while Hero MotoCorp, the world’s largest two-wheeler manufacturer, reported a net profit of Rs.746 crore - growing at a rate of 31%.
Sector-wise banking, pharma and automobile carry maximum weightage in the benchmark index and these three sectors too bore the brunt during the year. The Indian banking sector struggled to avert the rising NPAs; while the pharmaceutical industry faced regulatory actions by the US and EU regulators. The automobile sector found on a receiving end with slowing demand and re-call issues.
Furthermore, strong US dollar helped the IT giants to put up an impressive show; while lower crude oil price resulted into better earnings for refiner like Reliance Industries. However, huge investments in various projects took a toll on the profitability of state-run oil & gas major ONGC. In addition, upsurge in coal production assisted the country’s largest coal miner, Coal India, to report significant growth in yearly net profit.
FDA woes hit drug maker’s profit
The US has been the most sought after market for Indian pharma companies and F&16 saw the USFDA issuing Warning Letters and drug re-calls by Indian companies, which ultimately dented the growth of Indian drug makers in the US markets. Companies attracting USFDA’s ire in FY16 included India’s top two drug makers, Sun Pharma and Dr. Reddy’s Laboratories along with Zydus Cadila, Wockhardt, among others. Dr. Reddy’s FY16 net profit declined by 19% or Rs.324 crore to Rs.1,355 crore; while the billionaire Dilip Sanghavi-led Sun Pharma narrowed its net loss by Rs.401 crore to Rs.1,073 crore in the period. However, Lupin and Cipla’s net profit rose by Rs.488 crore and Rs.217 crore to Rs.2,885 crore and Rs.1,398 crore respectively. According to ICRA, the harsh US FDA scrutiny and slowing economy in the US are expected to take a toll on Indian drug companies.
Defying odds, auto companies fared well
Notwithstanding the falling demand, automobile companies in the Sensex pack delivered impressive FY16 numbers. Hero MotoCorp’s FY16 net profit spurted by 31% or Rs.746 crore to Rs.31,32 crore; Bajaj Auto saw its net profit jumping by 30% or Rs.838 crore to Rs.3,652 crore; Maruti Suzuki’s FY16 net profit soared by 23% or Rs.860 crore to Rs.4,571 crore. On the other hand, riding high on zooming sales of JLR, Tata Motors back in profit zone with Rs.234 crore of net profit as against a net loss of Rs.4,739 crore in FY15. However, Mahindra and Mahindra’s net profit squeezed by 5% to Rs.3,167 crore.
Bad time for banking profitability
Out of as many as 40 banks listed on the BSE, majority of the public sector banks (PSBs) witnessed massive losses in FY16 due to mounting NPAs and declining credit growth. State Bank of India (SBI), India’s largest lender, suffered a major setback with its net profit tumbled by a whopping 68% or Rs.21,115 crore to Rs. Rs.9951 crore; while the country’s largest private sector bank, ICICI Bank, saw its net profit plunging by 13% or Rs.1,449 crore to Rs.9,726 crore in FY16. Among the Sensex-30, HDFC Bank reported a net profit of Rs.12,296 crore growing at 20% or Rs.2,080 crore; while Axis Bank saw its net profit for the year 2015-16 moving higher by 12% to Rs.8,224 crore.
Among other notable gainers in the Sensex pack, Adani Ports & SEZ’s net profit rose by 31% to Rs.2,842 crore, Infosys (Rs.15,786 at 30%), Asian Paints (Rs.1,597 crore at 20%), TCS (Rs.22,882 crore at Rs.19%), HDFC (Rs.7,093 crore at 18%), L&T (Rs.5,311 at 5%), and ITC (Rs. 9,845 crore at 2%).
On the flip side, Wipro posted a net loss of Rs.94 crore, NTPC (-Rs.48 crore), HUL (-Rs.23 crore), ONGC (-Rs.1,729 crore), Tata Steel (-Rs.1,538 crore), GAIL (-Rs.740 crore), and Bharti Airtel (-Rs.5,635 crore). The state-run Bharat Heavy Electricals posted a net loss of Rs.913 crore as against net profit of Rs.1,419 crore in FY15.