Gujarat companies perform poorly on bourses in third quarter

It is for the second consecutive quarter that many Gujarat companies have performed poorly.

The weakening rupee, European crisis and higher interest rates have dented the net profit margins of almost every second listed company from Gujarat. Among the top 15 companies, more than 10 have either posted loss or witnessed huge fall in their net profits in the third quarter of current fiscal ended
December 2011.

The rupee which was traded at around 44 against dollar in mid-2011 depreciated to the levels of 53 between October and December 2011. Though it may be notional loss, the currency depreciation of more than 20% in the quarter brought down the net profits of the company with double digits decline.

The e-bike manufacturer, Electrotherm Ltd has seen fall of 3,500% in the net profit as the company posted loss of Rs132 crore. The denim maker, Ashima Ltd which has been facing crisis for a couple of years, saw fall of more than 700% with a Rs2.80 crore loss.

Dependent on imported coal, Adani Power had two big factors - rise in imported coal prices and appreciated rupee — responsible for the loss of Rs358 crore in the quarter, a loss of 428% in the net profit.

The private sector is not alone to face the heat. Of the six listed public sector companies of the state, four witnessed fall in their profit during the period. The PSUs, including GNFC, GIPCL, GSFC and GSPL witnessed fall of more than 20% in their net profits. Ahmedabad’s biggest company by market capital, Adani Enterprises registered fall of 14% in its net profit, while the net profit of Sintex Industries was down by 27%.

The defensive stock company, Zydus Cadila which is listed as Cadila Healthcare on stock bourses went down by 8% in its net profit. Another company of Zydus Group, Zydus Wellness too witnessed fall of 4.70% in its net profit.

However, there are companies like Adani Ports, Torrent Pharmaceuticals and Torrent Power, along with two state-owned PSUs GACL and GMDC which have beaten the trend in the third quarter.      

Focusing on domestic growth, these companies were not affected much by weak rupee or higher interest rates.

"The two reasons are the big factor," said Mahendra Prajapati, associate vice president, India Infoline Ltd. "During the quarter, the rupee depreciated and banks kept their lending rates unchanged. This resulted in fall in companies' net profit," he said.

According to Prajapati, even the fourth quarter, which will end on March 31, 2012, may not be good for companies. "Right now, rupee has appreciated to the levels of 49. But this is not sufficient. The lending rates are still higher which will affect the results of the companies listed on stock exchanges," he said.

Investors should stay away from stock market for a while, suggests Nilesh Kotak, MD & CEO of Dhanvarsha Fincap Pvt Ltd. "The results started to decline from second quarter, followed by third and even the fourth quarter is not expected to do any better. So, investors should wait and watch for some time," said Kotak