Q3 Nifty Earnings Point To Recovery For India Inc.

As many as 28 companies of the Nifty 50 constituents have announced their results for the quarter ended December. Of them, 20 beat estimates for net profit.

The aggregate profit of 28 companies grew 23.7% year-on-year and 11.9% sequentially, according to BloombergQuint’s calculations based on Bloomberg data.

Revenue estimates were available for 26 companies as on Feb. 1. Out of these, 18 companies reported revenue better than the forecasts. Aggregate revenue of the 26 companies rose 5.7% year-on-year and 22.2% sequentially.

Ebitda margin of 20 companies—excluding banking, financial and insurance firms—rose, on average, to 21.3% in the three months through December 2020 compared to 17.6% during the same period a year ago.

A marginal rise in gross margins over last year, aided by low-cost inventory, cost rationalisations and higher resource earnings will support earnings recovery in the third quarter, Edelweiss said in a report.

Here’s a sector-wise view of the performance of Nifty 50 companies in the third quarter.

Information Technology

All five information technology companies in the Nifty 50 index—Infosys Ltd., Tata Consultancy Services Ltd., Wipro Ltd., Tech Mahindra Ltd., and HCL Technologies Ltd.— have announced their earnings. These companies beat estimates for net profit, aided by broad-based growth across geographies and verticals.

Improved performance of the IT sector is due to mega-deal wins by TCS, Infosys, Wipro, and HCL Technologies, suggesting resilience to macroeconomic concerns, said Motilal Oswal in a report. Upbeat commentary and a healthy outlook indicate an acceleration in further spending on technology and the increase in offshoring and automation were the key levers for the margin growth in 3QFY21, the report said.

Oil And Gas

Reliance Industries Ltd.’s net profit rose 12% year-on-year, helped by decline in total expenditure and tax liability. Yet, its stock fell 10% after earnings.

Analysts expressed concern over transparency as the company stopped reporting its gross refining margin—a critical metric related to refining. Reliance Jio Infocomm Ltd.’s net subscriber addition stood at 5.2 million in the third quarter—less than half of its three-quarter average of 11.87 million. JPMorgan said in a report that the company’s operating profit was marginally lower than expectations across all segments.

Automobiles

The third-quarter earnings of Bajaj Auto Ltd., Maruti Suzuki India Ltd. and Tata Motors Ltd. received a boost from festive and pent-up demand, and preference for personal mobility following the pandemic.

Bajaj Auto Ltd. reported its highest-ever quarterly profit, revenue and operating profit during the three months ended December. Revenue, profit and Ebitda rose 17%, 23%, and 27% year-on-year respectively.

Tata Motors’ revenue and net profit grew 6% and 67% year-on-year, while Maruti Suzuki’s revenue and net profit rose 13% and 24% year-on-year.

Banks

Kotak Mahindra Bank Ltd., HDFC Bank Ltd., ICICI Bank Ltd., IndusInd Bank Ltd., and Axis Bank Ltd. have announced their results so far, with Kotak Mahindra Bank, ICICI Bank, and HDFC Bank beating analyst forecasts for profit.

Improved growth rates for banks, significant acceleration in mortgages, slashed MCLRs (marginal cost of funds-based lending rate) and improved liquidity is expected to support the sector’s earnings in the third quarter, Edelweiss said in a report.

• Kotak Mahindra Bank beat estimates for net profit as net interest income—or the lender’s core income—rose 16.8% year-on-year.
• HDFC Bank beat profit forecasts, helped by steady asset quality and 15% year-on-year improvement in net interest income.
• ICICI Bank’s net profit rose 19% year-on-year, aided by 16% growth in net interest income over last year.

Pharmaceuticals

Cipla Ltd. beat analysts’ profit estimates, aided by higher sales in India and Europe. Its revenue and operating profit rose 18% and 62% year-on-year, respectively. Dr. Reddy’s Laboratories Ltd., however, missed profit estimates.