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Feb 25, 2013, 03.00 PM IST | Source: Moneycontrol.com

India Inc records de-growth in sales in Q3FY13: CARE

CARE Ratings has come out with its report on corporate performance for Q3FY13. According to the rating agency, the growth in sales is expected to be on lower side from the level what was achieved in Q4FY12 i.e 14%, as many companies have reported decline their sales in Q3FY13.

CARE Ratings has come out with its report on corporate performance for Q3FY13. According to the rating agency, the growth in sales is expected to be on lower side from the level what was achieved in Q4FY12 i.e 14%, as many companies have reported decline their sales in Q3FY13.

In continuity of our analysis on the performance of companies for Q3FY13, we find that growth in sales remains under pressure while raw-materials cost, which had softened its growth in the first two quarters of FY13, has reversed the trend and has affected the operating profits. Interest expenses have been fluctuating (quarterly) during FY13 and remained on higher side, being dependent on movement of Rupee (vis-a-vis US Dollar).

CARE Ratings has done an analysis of quarterly results reported by select listed companies forming part of BSE500/NSE500 to understand the profitability trends and provide forecast thereof. This report examines how the companies had performed in Q3FY 2013 factors like Price, cost, interest & exchange rates. To ensure consistency in results, a set of companies have not been taken as a part of this report.

Sales of the companies in aggregate terms reported an increase in Q3FY13 (year-on-year or y-o-y basis) but the growth rate still remained a concern as compared to previous quarters. Out of 438 companies, 134 companies reported decline in their sales. Major slowdown was seen in the Auto sector (including auto ancillaries). Auto sector which comprised 33 companies in the total list of 438 companies, had contributed 13.97% in the total sales reported by our set of companies in Q3FY12. Out of 33 companies in the auto sector, 16 companies (mainly in the CV segments) reported decline in their sales by Rs.4342 crore in the Q3FY13 as compared with Q3FY12. TATA Motors one of the leading OEM reported largest decrease in its sales followed by Ashok Leyland and Bharat Forge .

Interest expenses: In the last review, we had estimated that interest expense of the companies would come down. The interest expense had witnessed a downward trend in Q2FY13 but has bounced back on higher side indicating that banks are yet to pass on the benefits of reduction in rates to its customers and the impact of currency losses on borrowings.

Outlook for Q4FY13

We expect the growth in sales to be on lower side from the level what was achieved in Q4FY12 i.e 14%, as many companies have reported decline their sales in Q3FY13.

Interest: While RBI has indicated reduction in repo rates after a long gap, the impact is not yet being seen in corporate profitability. We expect some positive movement this quarter, except if there are negative surprises on forex front.

Forex losses: Foreign currency fluctuations will also help determine the profitability of Indian companies, given the significant differences in reporting figures in the last few quarter ends and their impact on bottom-lines.

Disclaimer: This report is prepared by the Ratings Division of Credit Analysis & Research Limited [CARE]. CARE has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE is not responsible for any errors or omissions in analysis/inferences/views or for results obtained from the use of information contained in this report and especially states that CARE (including all divisions) has no financial liability whatsoever to the user of this report.

To read the full report click here

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