Small was beautiful in Q2 - Midsize companies in top league of 1005 corporates.
Mid-size corporates top league of 1,005 in second quarter
Vijay Gurav & Daniel Fernandes (ET)
MUMBAI 31 OCTOBER
FIRST it was big, then it was small that was beautiful. Now, mid-size companies have performed better than the relatively bigger and smaller sized companies, an exhaustive study of second quarter results of 1,005 companies shows.
The sample of 1,005 companies has been classified into four groups (this also defines mid-size) according to their sales in the second quarter (ended September '99) - 1) Rs 1,000 crore and above, 2) Rs 500-Rs 1,000 crore, 3)Rs 100-Rs 500 crore and 4) Below Rs 100 crore.
One significant finding is that 151 companies with sales between Rs 100 and Rs 500 crore have recorded a substantial 31-per cent rise in the aggregate net profit to Rs 2,615 crore for the quarter as compared to Rs 1,991 crore in the corresponding period in the previous year.
This is despite the relatively lower growth of 11 per cent in aggregate sales from Rs 29,585 crore to Rs 32,814 crore during the period.
The study shows that margins picked up in such companies, especially on account of two factors - less than proportionate rise in expenses and higher other income. While the proportion of total expenses in relation to the total sales went down from 78 per cent to 76 per cent, aggregate other income of the 151 companies rose 26 per cent from Rs 921 crore to Rs 1,158 crore.
Analysts attribute the lower expenditure to cost-cutting measures that most corporates had adopted in adverse conditions in the last couple of years.
The list of 151 companies includes firms from varying industry backgrounds with notable examples being BSES, Madras Fertilisers, TVS Suzuki, EID Parry, Hindlever Chemicals, India Cements and Nirma.
The biggies are not far behind, with the 21 Rs 1,000-plus crore companies recording a 15-per cent growth in aggregate net profits to Rs 5,397 crore during the quarter. The growth in sales, however, was higher at 29 per cent to Rs 75,765 crore from Rs 58,911 crore previously. Indian Oil Corporation, which topped the list, posted a 24-per cent rise in net profit to Rs 988 crore and a 41-per cent rise in sales to Rs 22,147 crore.
FMCG giant Hindustan Lever Limited (HLL) and petrochemicals giant Reliance Industries are the two other major companies in the group. While HLL recorded a net profit growth of 28 per cent to Rs 285 crore and sales growth of seven per cent to Rs 2,452 crore, in the case of Reliance the figures stood at 28 per cent (Rs 612 crore) and 30 per cent (Rs 4,836 crore).
Small-sized companies grew slowly this quarter, though only in terms of sales. While aggregate sales of 814 such companies rose moderately by three per cent to Rs 17,385 crore, the aggregate net profit, however, has risen significantly by 27 per cent to Rs 831 crore.
The study shows that while some of the companies in this group have shown a decline in sales during the quarter, some others, especially finance companies, have not earned income from their main activities but could earn profits from other income.
One factor responsible for the disproportionate growth in net profit is a decline in interest costs. Aggregate interest cost of the 814 small-sized companies fell marginally by two per cent to Rs 1,408 crore from Rs 1,430 crore.
A case-by-case study shows that Essar Shipping is one such company which recorded a sharp decline in both sales (13 per cent to Rs 98 crore) and net profit (71 per cent to Rs 4 crore).
However, a few companies in the group such as Knoll Pharma and Jindal Steels have posted a sharp rise in bottomline though their sales growth remained under pressure.
Knoll Pharma witnessed a three-fold jump in net profit to Rs 41 crore with sales growing only by 10 per cent to Rs 77 crore. Jindal Steels recorded an over four-fold jump in net profit to Rs 23 crore and 12 per cent rise in sales to Rs 86 crore.
Meanwhile, the big picture that emerges from the study is encouraging, pointing once again to the overall recovery under way. While aggregate sales of the sample companies rose by 19 per cent to Rs 1,38,682 crore, their aggregate net profit moved up by 17 per cent to Rs 9,897 crore. Aggregate other income rose six per cent to Rs 4,461 crore, reflecting operational efficiency, at least in the period under the study.
A look at industry-wise performance shows that cement companies (except ACC) have shown a major turnaround in their performance with 17 cement companies recording a rise of around 300 per cent in the aggregate net profit to Rs 110 crore and a 16-per cent rise in the total sales to Rs 2,137 crore in the quarter ended September 30, ?99.
Other winner industries include infotech, paper and steel which have shown a good recovery in performance reflecting reversal of the trend. |
