Corporate earnings grew in double digits during the April-June 2022 (Q1FY23) quarter but the momentum waned.
Overall corporate earnings in the quarter were down sharply from their highs in FY22.
The combined net profit of 2,981 listed companies across sectors in the Business Standard sample was up 22.4 per cent YoY to Rs 2.24 trillion in the June quarter, driven by a big jump in the earnings of banks, non-banking lenders, oil & producers, and FMCG companies.
Also, earnings in the corresponding quarter a year ago were affected because of the second wave of the Covid pandemic, even though the numbers were a lot better than Q1FY21 when there was a nationwide lockdown.
Earnings in the first quarter of FY23 also got a boost from large exceptional gains for select companies, such as Adani Power, Suzlon Energy, Zuari Agro Chemicals, Sun Flag Iron, and D Reddy’s Laboratories.
Excluding profits of banks, non-banking lenders, insurance companies and stock brokers (BFSI), the combined earnings of the rest of the sample were up 16.3 per cent YoY to Rs 1.58 trillion in Q1, growing at the slowest pace in the past eight quarters.
The overall profit of these non-BFSI companies was down 22.3 per cent on a sequential basis, from a record quarterly high profit of Rs 203 trillion in Q4FY22.
The combined earnings of the sample companies were, however, the lowest in the past four quarters and 16.9 per cent less than the record corporate profit of Rs 2.69 trillion during the January-March 2022 quarter.
Among individual companies, Oil & Natural Gas Corporation (ONGC), Reliance Industries, Coal India, Adani Power, and Mangalore Refinery and Petrochemicals (MRPL) were the biggest contributors to YoY growth in corporate earnings in the first quarter.
These five companies together accounted for nearly 73 per cent of the Rs 40,921-crore incremental growth in corporate earnings on a YoY basis during the quarter.
ONGC alone accounted for more than a quarter of all the gains in earnings in Q1FY23, followed by RIL at 13.9 per cent, and Coal India at 13.8 per cent.
At the other end of the spectrum, public sector oil marketing companies -- Indian Oil, Bharat Petroleum (BPCL) and Hindustan Petroleum Corporation (HPCL) -- were the biggest laggards and reported a sharp decline in earnings.
In fact, BPCL and HPCL reported a net loss during the quarter. Other big companies with major decline in earnings on a YoY basis during the quarter included JSW Steel, Steel Authority of India (SAIL), Power Grid Corporation, NMDC, and Tata Steel.
The results for the first quarter show a steady decline in corporate margins because of higher material and energy costs.
The operating or Ebitda margin for the entire sample was down nearly 410 basis points YoY to 22.5 per cent of total income -- the lowest in the past nine quarters.
The core operating margin (that excludes other income) was down 326 basis YoY to 19.63 per cent of net sales -- the lowest since the January-March 2020 quarter. One basis point is one-hundredth of a per cent.
The margin contraction is even sharper for companies, excluding banks, non-banking lenders, insurance, and stock brokers (BFSI).
The operating margin for non-BFSI companies was down 450 basis points YoY to 15.3 per cent of total income in Q1FY23 -- the lowest since Q1FY21.
These companies’ core-operating margin, on the other hand, was down 407 basis points over a year to 13.83 per cent of net sales in the June 2022 quarter – the least in the past eight quarters.
Corporate India's revenue growth in the April-June period was among the best in recent years, because of price hikes by companies across sectors in view of high inflation and costlier commodities and energy.
Net sales for the entire sample were up 38.1 per cent to record a high of 19.72 trillion in Q1FY23, up from Rs 21.53 trillion a year ago.
In comparison, combined earnings of non-BFSI firms were up 46.1 per cent YoY to a record Rs 25.06 trillion in the June 2022 quarter, from Rs 17.16 trillion a year ago.
Oil & gas companies, including Reliance Industries, were the biggest contributor to India Inc top-line growth; their combined net sales surged 75.6 per cent YoY to Rs 8.16 trillion against Rs 4.64 trillion a year ago.
Consumer goods sectors, such as automakers and FMCG companies, reported 30 per cent-plus YoY growth in net sales in the first quarter of FY23, thanks to a mix of higher volumes and price hikes to compensate for higher metals and commodity prices.
