Q1FY15 results review: demand slowdown unabated; low base year helps boost Q1FY15 net profit

Quarterly corporate results did not provide much evidence of an improvement in the health of the economy in the first quarter ended 30 June 2014. Net profits grew by 27 per cent over a low base year, but net sales grew 8.16 per cent for the entire period and a paltry single digit (3-7 per cent) for most domestic consumption sectors.

However, corporate profit growth in Q1FY15 looks robust on account of a net loss of over Rs21,000 crore reported by 602 companies in Q1FY14. The net profit for a sample of over 2,400 companies grew 27 per cent in Q1FY15, but if one excludes the Q1FY14 loss makers from the sample, the growth rate slides to a paltry single-digit at 5.88 per cent.

Profit growth moved up at 12.86 per cent for the companies that earned profits in both quarters. The companies with overseas revenues (thanks to a sharp depreciation in the rupee) have had a strong influence on profit growth. Yet there is no big push to indicate a turnaround during the quarter as the companies contributed a meagre 5 per cent to their net profit.

Net sales grew by 8.16 per cent for the sample indicating there has not yet been a pick-up. Banks, capital goods, infrastructures, mining and telecom services reported sub 5-7 per cent growth in net sales indicating lack of credit demand and fresh investments in these highly capital-intensive sectors. None the less the government's desire to decontrol oil helped oil marketing firms post double-digit growth in sales for first time in the last four quarters.

Sales growth for mass consumption sectors such as textiles, retail, consumer durables, hotels, beverages and fast-moving consumer goods remained in single-digits. Automobiles (thanks to Tata Motors), pharmaceuticals (rupee depreciation) and non-ferrous metals (Hindalco) sector reported strong 15 per cent plus growth in net sales on the back of their export revenue and sterling performance from the sector leaders.