Corporate India is making money hand over fist. Stockmarkets already know this, but we now have the numbers to prove it beyond all doubt.
MUMBAI: Corporate India is making money hand over fist. The stockmarkets already know this, but we now have the numbers to prove it beyond all doubt. In the third quarter (Q3) of 2006-07 ended December, India Inc reported at least 10 companies with over Rs 1,000 crore in net profits and 19 with $1-billion-plus quarterly sales. And that’s not counting the financial sector.
A DNA Money survey of 1,800 manufacturing and services companies (excluding financial services) shows that six new companies joined the $1 billion quarterly sales club in Q3, up from 13 in 2005-06. The new entrants are Sterlite Industries (net sales: $1.54 billion), State Trading Corporation ($1.25 billion), IBP ($1.23 billion), Bharti Airtel ($1.11 billion), TCS ($1.10 billion) and Hindalco ($1.06 billion).
Seven companies joined the Rs 1,000 crore net profits club. Last year, only three companies - ONGC, NTPC and Reliance Industries - had quarterly net profits in excess of Rs 1,000 crore. This year they have plenty of company: SAIL (net profit Rs 1,471 crore), Hindustan Zinc (Rs 1,335 crore), Sterlite Industries (Rs 1,295 crore), TCS (Rs 1,116 crore), Tata Steel (Rs 1,088 crore), Indian Oil (Rs 1,059 crore) and Bharti Airtel (Rs 1,033 crore). Infosys Technologies missed joining the group in Q3 by a narrow margin of Rs 17 crore (Rs 983 crore).
The 1,800 companies in the sample posted net profit growth of 77.7% on a topline growth of just 29.72% during the October-December, 2006. This means that profitability is robust. These companies accounted for 79% (or Rs 30.51 lakh crore) of the Bombay Stock Exchange’s (BSE’s) total market capitalisation of Rs 38.53 lakh crore.
While the aggregate net profit of 1,800 companies soared from Rs 26,081 crore in October-December, 2005, to Rs 46,346 crore in the corresponding quarter of 2006, net sales were up from Rs 3,72,930 crore to Rs 4,83,758 crore during the same period.
Operating profits soared by 55.73% to Rs 87,027 crore while operating margins improved by 300 basis points (100 basis points = 1%) to 18%. Net profit margins also rose by 260 basis points to 9.60%.
The big boys are doing better, suggesting that in this phase of economic growth, size and scale are beginning to matter. In all, 69 big companies having net sales of over Rs 1,000 crore in October-December, 2006, posted 89.7% growth in net profits to Rs 33,678 crore on a net sales growth of 32.3%. These companies accounted for the lion’s share of 52.3% of the BSE’s total market capitalisation.
In contrast, 179 mid-size firms in the sample, with net sales between Rs 251-1,000 crore during the quarter, recorded a 56.7% rise in net profit to Rs 6,859 crore and 27.1% in sales to Rs 80,169 crore.
The remaining 1,552 small-sized companies with net sales below Rs 250 crore posted a 47% gain in net profits to Rs 5,808 crore and 21.7% in sales to Rs 72,087 crore.
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