India Inc’s market leaders had a solid end to 2018 but their gains were largely due to external factors
- The third quarter for 2018-19 was expected to be marked by slowing
revenuegrowth and lower margins for India Inc.
- However, three of India’s largest companies,
Reliance, TCSand Hindustan Unilever bucked the trend.
- All posted solid earnings results, but this was largely due to the base effect from the year-ago period and the rupee’s depreciation.
Towards the end of the year, revenue growth for the corporate sector was slowing, according to CRISIL, a ratings agency. In fact, India’s corporate sector was forecast to record a 4-5% decline in
However, in nominal terms, India Inc recorded a boost since the year-ago quarter in 2017-18, which was marked by the lingering effects of the demonetisation and the flawed implementation of GST. In addition, the rupee had weakened nearly 10% year-on-year, thereby increasing earnings for exporters and companies with a large international presence.
The aforementioned factors were mostly seen in the Q3 results of India’s market leaders, which counted on their strong urban presence and scale to offset subdued rural demand. This defied the larger performance of India’s corporate sector.
Reliance Industries, India’s largest company by market capitalisation, posted a 9% rise in its net
As a result of accelerated store expansion, its retail unit bucked the trend and posted strong festive sales, nearly doubling its quarterly revenue to ₹358 billion. The consumer unit’s expansion has been supported by profits from the petrochemicals business.
IT major TCS, the country’s second largest firm by market cap, reported a 24% rise in net income to ₹81.1 billion, based on strong earnings from its cloud computing and analytics business in international markets like the UK and Europe. Its overall margins were, however, weighed down by higher costs such as hiring expenses as it onboarded a lot more employees during the quarter in order to meet its higher deal order.
Meanwhile, consumer goods giant HIndustan Unilever Ltd, fresh off its deal with GlaxoSmithKline, saw sales rise 12% to ₹93.4 billion as revenue from the home care and beauty segments rose in the double digits owing to price hikes. The company’s profits increased by 9% to ₹14.4 billion - the slowest pace of income growth in a year but in line with analysts’ expectations.
Looking ahead to 2019-2020, a depressed inflation outlook will hamper revenue growth further. India Inc will count on a rate cut by India’s central bank and increase liquidity support to banks in order to offset external pressures such as oil price volatility, global trade tensions and rate hikes in developed markets. Ahead of general elections, the government’s attempts to boost rural consumption will likely pay off in higher revenue growth in the first six months of 2019 but companies will have limited pricing power.
Reliance Industries just beat Tata Consultancy Services to become India’s highest-valued company
Hindustan Unilever and GlaxoSmithKline’s domestic consumer unit are merging in what is said to be India’s largest consumer goods deal ever