Tuesday, January 13, 2009

Third quarter may be the worst for Nifty cos

The December 2008 quarter is expected to be one of the toughest quarters for Corporate India and may prove to be a precursor to the challenges that lie ahead of India Inc.

According to the quarterly estimates by ET Intelligence Group, nearly half of the Nifty companies are likely to report either a fall or near-flat net profits for the quarter compared with the corresponding quarter of the previous year. However, all may not be lost as companies from select sectors may report a robust growth.

Slowing domestic industrial production, slump in the global demand, crisis in financial markets in the West and a sharp currency fluctuation are the major factors that are likely to create headwinds for India Inc in the third quarter of the current fiscal.

Barring a few exceptions such as telecom, banking, cement and FMCG, companies from other sectors are likely to report decelerating revenues and declining profits. The third quarter is expected to be one of the worst quarters in the recent history for the automobile sector. Three companies from the sector are expected to be among the 10 worst Nifty performers.

Commercial vehicle manufacturers would find it difficult to sustain a growth given more than 50% contraction in truck sales. Further, Tata Motors could experience its first quarterly loss in seven years due to a sharp decline in truck and passenger car sales by estimated 40% and 20%, respectively.
This is despite falling metal prices, which may bring in some cost advantage. Maruti Suzuki is likely to see a 50% drop in profit after tax (PAT), as vehicle sales are expected to drop by 14%.

Ranbaxy is likely to be the worst performer in the Nifty, as it may report huge losses even though it may see a growth in revenue. While the rupee depreciation could add to the company’s export earnings, translational loss in forex borrowings, and increased interest rate cost could weigh heavy on net profit. The company may also experience a negative impact of loss of business in the US due to ban on its 30 drugs in the country.

Companies in the petroleum sector are expected to post contraction in revenue, following a sharp drop in crude oil prices. Oil price plummeted by nearly 55% in the third quarter. Petroleum refineries are likely to report contraction in refining margins. Companies like Reliance Industries (RIL) and ONGC could see a decline in their revenues as well as in net profits.

Source: http://economictimes.indiatimes.com/Third_quarter_may_be_the_worst_for_Nifty_cos/articleshow/3974932.cms

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