CARE Ratings has come out with its corporate results for Q3-FY13. According to the rating agency, net profit margin improved to 10.1% in the third quarter of the current financial year as against 8.1% in the corresponding quarter of the previous year. This was a result of growth in net profit being higher than that in sales.
A study of the performance of 562 non-financial companies showed that net sales increased by 14.6% in Q3-FY13 as against 24.4% for the corresponding quarter in the previous year, while net profit increased by 43.5% in Q3 FY13 compared with growth of negative 13.9% in Q3-FY12. Consequently, there was an improvement in net profit margin from 8.1% to 10.1% for the above mentioned periods.
Net sales registered a growth of 14.6% in Q3-FY13 compared with 24.4% in the previous year. The Industrial performance in this quarter has been rather mixed. October IIP numbers saw a significant increase of 8.3% which can be primarily attributed to the low base effect as well as preparation for the festival of Diwali. However, the month of November witnessed negative growth of 0.1%.
Change in stocks fell by 112.5% in Q3 FY13 as against an increase of 253.1% in Q3 FY12, indicating lower inventory levels in the manufacturing sector; a slight pick up in demand during the festival season is one of the reasons for this phenomenon. This could be indicative of production too picking up as there would be fewer inventories to fall back on to meet future demand.
Total expenses grew by 13.8% in Q3 FY13 as against 28.7% in Q3 FY12.
A comforting factor has been that the growth in raw materials expenses witnessed a significant decline from 34.6% in Q3-FY12 to 14% in Q3-FY13. This is mainly because of decline in the average inflation from 9.0% in the third quarter of FY13 to 7.4% in the third quarter of current fiscal, thereby bringing down the nominal value of raw material purchases.
Salaries and wages saw a considerable decline in growth, from 23.1% in Q3-FY12 to 15.3% in Q3-FY13.
Interest expenses saw a decline in growth rate from 56.7% in Q3-FY12 to 13.9% in Q3-FY13. Two aspects can be looked at here: bank credit and interest rates. Growth in bank credit witnessed a decline from 16.0% growth in December 2011 to 15.1% in December 2012. Moreover, incremental credit in the third quarter has also declined marginally to Rs 1,419 billion in FY13 (as against Rs 1,436 billion in FY12). Also average base rate declined to 10.26% from 10.47% in Q3 FY12. Therefore, lower interest expenses growth was more on account of lower off take in credit.
Interest to sales ratio remained unchanged at 1.6% in Q3 FY13.
Interest cover, defined as PBIT to interest payments, improved from 7.9 in third quarter FY12 to 9.2 in the corresponding period for the current fiscal.
Net profit margin improved to 10.1% in the third quarter of the current financial year as against 8.1% in the corresponding quarter of the previous year. This was a result of growth in net profit being higher than that in sales.
The performance of 20 banks showed that net sales (interest income) increased by 15.2% in Q3 FY13 as against 36.7% in the previous year. Interest expenses grew at a slower rate of 14.9% (52.7%). The growth in other provisions and contingencies increased significantly to 22.7% (8.4%) in Q3 FY13, reflecting provisions made for NPAs. The net profit saw a growth rate to 21.7% as against 14.7% in the third quarter of the previous year.
A concern that has developed during this period was the build-up in non-performing assets (NPAs). Gross NPAs increased by around 28.8% from Rs 32,602 crore to Rs 42,001 crore for these 20 banks and Net NPAs saw an increase of 30.2% from Rs 16,229 crore to Rs 21,127 crore. The Gross NPAs and the Net NPAs increased to 2.5% (2.3%) and 1.2% (0.9%) respectively in the third quarter of the financial year. The impact of the economic slowdown is getting reflected in the increase in NPAs.
All the 20 banks maintained capital adequately ratio of above 10%. 9 banks saw an increase in this ratio in the third quarter of the current fiscal when compared with the same quarter last year.
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