INDIA BUSINESS WORLD - APRIL 2006
THE MONTH THAT WAS

INDIA INC SHOWS COMBINED NET SALES AND NET PROFIT GROWTH OF 32% AND 37%

INDIA Inc seems to have had an outstanding FY06, if numbers posted by early birds are an indicator. The first 50 companies to post annual results for the year ended March '06 have shown combined net sales and net profit growth of 32% and 37%, respectively. While the IT companies led by TCS and Infosys account for 72% of the sales growth and 80% of PAT growth, the buoyancy seems pretty broad based with just two companies showing decline in net sales. The combined operating margins of these 50 companies have also improved to 24% in FY06 from 22.5% in the previous year, despite a 51% growth in employee costs.

it is not just the full-year numbers that are cheering up investors. The good times seem to have continued in the first quarter of 2006 as the first 80 quarterly results show net sales and net profit jump of 35% and 55%, respectively.

Again the growth trend appears to be well spread out with just 10 out of the 80 companies reporting lower net sales than those in the corresponding period of the previous year. Also, just 12 of these companies have shown a decline in PAT numbers. Textile firms seem to have taken a hit on the top line with Indo Rama Textiles, Pacific Cotspin and Bala Techno synthetics reporting lower figures than last year. TCS, HDFC Bank and UTI Bank have led the growth bandwagon. Hindustan Copper has reported the highest q-o-q growth in net sales — 200% — for Q4 FY06.

 For FY06, among the software majors, TCS, Infosys and MphasiS have posted net sales growth of 36%, 34% and 23%, respectively, over the last financial year while CMC and iGate have both grown marginally by 10%. Aztec Software has been the most impressive small IT player with a 100% plus growth in both net sales and PAT. On the bottom line front, just six of the 50 companies have reported a decline over FY05. While Godavari Fertilisers and CMC have been the top performers on the PAT front with 75% and 96% growth rates, respectively, iGate Global Solutions, Jay Bharat Maruti and NDTV have reported a decline in PAT figures.

On the cost front, the 51% growth in employee cost is driven primarily by TCS and other software companies. The overall interest outgo has increased by 12% over FY05 while depreciation charges have increased by 46%. The growth in raw material prices has been in line with sales growth at 30%. The combined PAT margin for these companies stood at 18.5%, an improvement of 70 basis points over last year.