Other income lifts India Inc.'s profits

A 59 per cent rise in other income helped India Inc. to deliver a 32 per cent growth in net profit for the quarter ended December 2007, to Rs 70,232.2 crore (we used data for a total of 2,006 companies). Says Ambareesh Baliga, Vice President, Karvy Stockbroking: “The profit figure was inflated by the sales of assets and revenues from investments.”

Companies in the banking, cement, metals, oil & gas, engineering and construction sectors were the major contributors to the rising profits, while the appreciating rupee and rising input costs, especially of crude oil, resulted in sectors like paints, textiles and transport services underperforming.

Other income rose from Rs 18,486 crore in December 2006 to nearly Rs 29,500 crore in December 2007. “If the other income component is excluded, then the results are nothing to cheer about, and are in line with our expectations.

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Secondly, the market wants more than what’s expected,” he says, adding: “No one is now looking at fundamentals in this volatile market.” Excluding other income, India Inc. has still managed to record an operating profit growth of 24 per cent. The net sales of the companies rose 19 per cent to Rs 5,84,908.4 crore.

Reliance Industries, which has a 15 per cent weightage on the BSE Sensex, posted spectacular results; its top line grew 23 per cent and bottom line a massive 162 per cent. The growth in profit was on account of an exceptional item of Rs 4,733 crore from the sale of Reliance Petroleum shares.

Excluding this extraordinary income, the company still registered a decent 26 per cent growth in profit to Rs 3,882 crore. India’s largest bank, State Bank of India, also came out with impressive numbers. Its operating profit rose 42 per cent to Rs 4,925,85 crore and net profit zoomed 70 per cent to Rs 1,809 crore. Says Baliga: “Going forward, margins will remain under pressure. It will be interesting to see how India Inc. deals with the closing demandsupply gap and lower pricing power. However, on a rising base, India Inc. will still continue to grow between 20-25 per cent.”

Touche!

— Mahesh Nayak