Banking, IT, Oil, Finance sectors accounted 69% of India Inc's earnings this Q4FY17

Performance of India Inc over the last quarter of FY17 indicated a positive picture with both bottom-line (profit after tax) and top-line (net sales) showing an improvement compared to the same period of previous fiscal.

Care Ratings said that India Inc recorded a whopping 67.3% growth in net profit this Q4 as against negative 48.9% in the corresponding period of last year.

Profit after tax of 732 companies stood at Rs 53,361 crore between January – March 2017 period, compared to Rs 31,895 crore in Q4FY16 and Rs 62,464 crore in Q4FY15.

At the same time, net sales also rose by 10.5% in current period versus 7% growth in Q4FY16. In value terms, net sales was at Rs 6,86,683 crore higher from Rs 6,21,384 crore in Q4FY16 and Rs 5,80,961 crore in Q4FY15.

Interestingly, excluding banking, IT, oil exploration & refineries and finance companies, India Inc's performance net profit growth rate slowed down.

These four sectors had 183 companies reporting their financial performance this Q4, which means remaining 549 companies recorded growth of 9.5% (growth was negative 38.5% in Q4FY16) in net profit at Rs 16,522 crore. While net sales of 549 companies stood at Rs 3,25,010 rising by 10.8% in Q4FY17.

Above mentioned four sectors accounted for 69% of India Inc's earnings reporting net profit of 36,839 crore of the total Rs 53,361 crore this Q4. 

This came in as a surprise considering banks have been affected by rising non-performing assets (NPAs) and had to park higher provisions for it, while IT companies tend to get affected by global factors and carry almost negligible leverage. Meanwhile oil & refineries were haunted by the international crude price.

Banks' net profit growth showed a sharp rise at 135.7% at Rs 4,449 crore as against net loss of Rs 12,449 crore a year ago similar period. Net profit margin was also positive at 2.7% this Q4 versus negative 7.7% in Q4FY16.

However, Q4FY17 saw net sales of banks positive but a slower pace compared on a year-on-year basis. Net sales stood at Rs 164,345 crore up 2.1% from Rs 160,991 crore in Q4FY16.

Madan Sabnavis Chief Economists and Darshini Kansara Research Analysts of Care Ratings said, “Banks posted huge profits on the back of higher interest, non-interest and other income.”

The duo also added, “The performance of banks in Q4-FY17 may be evaluated against this background. With March 2017 also being the deadline provided by the RBI to banks to clean up their books, the overall direction appears to be positive on the whole though assuredly problems with specific banks remain.”

Also Read: Q4 Review: Reduction in MCLR worked well for private banks but not for PSBs

IT companies saw growth of 5.1% in Q4FY17 net profit at Rs 14,156 crore, compared to Rs 13,469 crore a year ago similar period. However, growth rate was lower compared to Q4FY16.

Similarly, net sales of IT companies increased by 3.7% at Rs 61,320 crore versus Rs 59,114 crore in Q4FY16.

Care Ratings said, “IT sales and profit registered growth but still under pressure on both fronts while margins maintained and also US impact probably just started.”

Moreover, Q4FY17 saw oil companies and finance companies recording growth of 16.6% and 14.1% in net profit and that of net sales witnessed growth rate of 33% and 9% respectively.

Explaining the performance, Care Ratings stated that oil companies posted healthy net sales growth and net profits also saw improvement. However profit margins declined this was due to fluctuating crude oil prices have an impact on domestic players.

Brent crude price was up 8% QoQ and 57% YoY to an average of $ 54.1 per barrel in 4QFY17. 

On the back of corporate earnings, Indian stocks exchanges have been recording new highs .

Between April 2017 – till date, Sensex and Nifty has given more than 5% return and had been trading near 31,000-mark and 9,600-level respectively.

Earlier a Kotak Institutional Equities report stated markets would be expecting from banking and finance companies for performance in credit growth, NIMs and RoEs in the retail segment and also continued high NPLs and LLPs in the wholesale segment. 

Outlook for FY18 looks positive for India Inc. 

An India Ratings report said, "Expects FY18 to be a better year for corporate profitability compared with FY16 and FY17. The agency expects EBITDA levels of corporate borrowers to grow 6%-8% on an aggregate basis on account of improved consumer demand and exports, and higher commodity prices."