India Inc's first quarter post GST: Here's a sector-wise review of early results

We are in the last phase of the September quarter earnings season, and the results announced by the BSE 500 companies so far have shown signs of a sharp recovery, as compared to the June quarter, when the economic activity in the country was compromised due to lockdown in various regions. From the BSE 500 list, 216 companies have announced their September quarter results so far. We excluded banking and financial companies.  Along with the index stocks we also analyse each sector quarterly earnings. (Data Source: ACE Equity)

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26 Aug, 2025 12:21

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While still early days, GST implementation challenges and weak consumer sentiment have been the broad themes of India Inc’s second quarter earnings.

Consumption-oriented sectors like media and FMCG testify to the supply chain disruptions and guarded spending on promotions. Others like financials and telecom continue to grapple with structural transitions.

Having said that, corporate honchos are hopeful of a rural recovery and consumption revival during the festive season. Given this context, we analysed the Q2FY18 results so far for the early takeaways.

The feedback is positive for firms supplying components to commercial vehicle (CV) and tractor makers. Tractor sales, in particular, seem to be on the rebound on the back of a good monsoon, agriculture credit schemes by the government, increase in farm profitability, and improved irrigation intensity.

For exports, North America and Europe will be the key markets for tractors given the consistent rise in demand for agro machinery and farming equipment in these continents. Exports to the Middle East and African regions, however, are unlikely to rise much in the near future.

A strong rupee vis-à-vis the US dollar may dent quarterly margins year-on-year.

Except for IndusInd Bank, where the non-performing assets (NPAs) were stable and slippages declined, bank earnings so far have been disappointing. NPA numbers of Lakshmi Vilas Bank and Axis Bank numbers were higher than what analysts expected. In case of South Indian Bank, slippages were high in absolute terms despite being lower on a sequential basis.

Q2FY18 revenues are expected to be sub-par as businesses struggled with the nuances of GST and manufacturers remained cautious about advertising in an uncertain environment. Start of the festive season, favourable consumer sentiment, and active ad spends (aided by better viewership) will be some of the key drivers that may benefit media companies in Q3FY18. The effectiveness of measures undertaken to promote regional content (news and entertainment) will be another factor to watch out for.

In terms of volume growth, FMCG companies reported a mixed set of numbers. While Bajaj Corp witnessed a rebound, Colgate’s volumes dropped. Both companies highlighted that supply chain normalisation is far from over. In light of this, Bajaj Corp is aggressively focusing on enhancing its direct distribution network. Colgate, which has been facing immense competition, is focusing more on ayurvedic variants of toothpaste.

Management commentary suggests that supply of affordable houses is yet to pick-up meaningfully, barring Gujarat. A noticeable increase in housing finance will be visible only when the government’s schemes gain pace in other large states like Maharashtra, Madhya Pradesh, and Rajasthan. Lack of adequate corporate lending prospects have forced public and private sector banks to up their ante in this space, thereby intensifying the competition.

IT results have been a reflection of ongoing changes in the sector. TCS’s margins were positive as the contribution from its digital revenue segment rose to 20 percent of sales. However, growth prospects in the BFSI and retail segments remain muted for the industry in general. Wipro’s numbers weren’t too good either, as the company was impacted by weakness in the healthcare market. Lower guidance for Q3FY18 was a disappointment as well. Cyient looks like an interesting pick, given its near-term margin improvement prospects and performance of the end markets that the company caters to.

Reliance Industries reported an operationally good quarter with mixed surprises.  Petrochemical margins of the company were good owing to an uptick in volumes and pricing. The quarter-on-quarter increase in refining margins was not to the extent expected by analysts. While this is a positive takeaway for other petrochemical companies, indications of margin pressure seem apparent for the downstream chemical/plastic processing companies.

Nerolac reported a healthy 20 percent volume growth in the decorative coatings segment (which constituted 55.5 percent of FY17 sales) on the back of restocking and pre-festive buying. While this augurs well for its peers (Berger Paints and Asian Paints) in the segment too, Nerolac’s high raw material costs (59.8 percent of sales in Q2FY18 vs 57.3 percent in Q2FY17) will remain a cause of concern in the context of a elevated titanium-dioxide prices.

Reliance Jio’s posted a profit at the operating income level. Despite the aggressive pricing, Reliance has been able to report an average revenue per user (ARPU) of Rs 156.4, which is comparable to other players in the industry. The telecom industry as a whole is witnessing stiff pricing competition, and high overheads may continue to weigh down profits. The speed and efficiency of integration of multiple revenue streams (such as cellular, home broadband, and entertainment) will also play a pivotal role in determining the breakeven trajectory for telcos in the long-term.

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