Top 5 family-owned biz groups see a mixed Q1; net profits up 13.9%

April-June 2023 (Q1FY24) was a mixed quarter for India’s top family-owned business groups.

Three of the big five in terms of revenue reported a year-on-year (Y-o-Y) decline in combined net sales and two saw a Y-o-Y fall in net profits.

Combined net sales of all listed companies in the five groups were up just 2.2 per cent Y-o-Y at Rs 6.6 trillion in the quarter, down sharply from the 10.3 per cent in the March 2023 quarter (Q4FY23) and 42.8 per cent in Q1FY23.

In comparison, combined net profits of the companies in the five groups were up 13.9 per cent Y-o-Y to Rs 55,551.4 crore in Q1FY24 as against Rs 48,764.4 crore a year ago.

Adani, Mahindra, and Tata Group companies topped the earnings growth charts while those in the Mukesh Ambani and AV Birla bailiwicks reported a Y-o-Y decline in net profit in the first quarter.

In comparison, Tata companies topped the growth charts with a 16.7 per cent Y-o-Y increase in combined net sales in Q1FY24, followed by Mahindra Group with 13.2 per cent.

In contrast, the other three groups reported a Y-o-Y decline in combined net sales. (See charts)

The analysis is based on the quarterly results of the listed companies of the top five family-owned business groups ranked in terms of revenue.

The sample has 33 companies, excluding listed subsidiaries of listed group companies.

Of these, 18 belong to Tata Group and there are six Adani companies on the list.

The sample excludes recently acquired and listed Adani companies such as Ambuja Cement, ACC, NDTV, and Adani Wilmar.

The Tata Group companies dominate the league, accounting for 40 per cent of net sales and 34 per cent of net profits.

They are followed by the firms run by Ambani with a 31.5 per cent and 29 per cent share of net sales and net profits, respectively.

The numbers suggest a big scale gap between Tata and Ambani Groups and the others.

In fact, large Tata Group companies such as Tata Motors, Tata Steel, and Tata Consultancy Services individually have higher revenues than the combined revenues of other groups.

Similarly, the individual business divisions of Reliance Industries such as refining, petchem, telecom and retail are bigger than other groups.

Among groups, Adani companies topped the profit growth charts, but this was largely due to a four times jump in Adani Power’s other income in Q1FY24 over the same period last year. Earnings growth aside, Adani Group companies’ net sales were down 24 per cent Y-o-Y to Rs 49,567.5 crore in Q1FY24 from Rs 65,307.4 crore in Q1FY23 and Rs 54,262 crore in the March 2023 quarter.

The decline in Adani Group’s net sales was due to lower revenue reported by Adani Power and Adani Enterprises.

While Adani Power’s net sales were down 19.8 per cent Y-o-Y in Q1FY24, those of Adani Enterprises were down 37.7 per cent Y-o-Y in the first quarter.

Adani Enterprises’ revenues were hit by a nearly 50 per cent Y-o-Y decline in its coal-trading business, which is part of its integrated resource management division and accounts for nearly two-thirds of Adani Enterprises’ consolidated net sales.

Mahindra and Tata Group companies were the most consistent performers, thanks to a good showing by their automotive and IT services businesses.

While Tata Group gained from double-digit revenue growth reported by Tata Motors and Tata Consultancy Services in Q1FY24, the Mahindra camp benefited also from double-digit growth in its automotive and financial services business.

In contrast, Ambani-run Reliance Industries and AV Birla Group companies including Hindalco and Grasim suffered from a decline in global commodity prices, leading to a decline in their revenues and net profits.

On a longer-term basis, most business groups have reported a sharp deceleration on revenue growth with the biggest decline reported by Adani companies.

Tata Group companies are an exception and their net sales growth in Q1FY24 was the best in the last three quarters.

This was due to a bigger contribution from global or overseas revenues.