Cos that reported good earnings but -ve PAT margins

Out of the total 295 companies that have come out with their results in this quarter, the profit margin of nearly 105 companies has fallen.

Even though these companies have shown a year-on-year growth in their net profit and net sales, their PAT margin has suffered a setback. Although fall in PAT margin can take place due to many reasons, the companies screened by moneycontrol that have negative PAT may be due to external factors like the "other income." or due to increase in the base..

PAT margin is calculated as net profit divided by sales and indicates that how much the company is earning out of every rupee of its sales. It gives investors a proper understanding of the efficiency of the management of a company.

The list of companies comprises frontliners like ACC, Biocon, HDFC Bank, IPCL, HDFC, Dishman Pharma, Bajaj Auto, Nicholas Piramal, Wipro, Mastek, Apollo Tyres. Their PATM% has fallen by 6.51%, 3.50%, 3.44%, 3.30%, 3.17%, 2.99%, 2.49%, 0.59%, 0.06%, 0.39%, 0.42% respectively.

But refuting that negative PAT margin indicates a company's weakness, experts say that these companies are fundamentally strong. One reason for the downfall can be difference in their exceptional item year-on-year. Other income component this year was lower than previous year. For example, Reliance Industries' other income this year is Rs 22 crore and last time it was Rs 202 crore.

Secondly maybe their base has expanded this quarter. So, on a broader base with net profit not as much as it was in the previous year, the profit margin will fall.

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