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Weak consumer spend hits India Inc sales in July-September

FE Bureau

India Inc continues to be under pressure with the July-September quarter earnings throwing in disappointing numbers. Net sales during the quarter were down 3.82% year-on-year in the absence of weak volumes and lack of pricing power. If the net profit for a sample of 693 companies (excluding banks and financials) was up 7.65% y-o-y, it was due to lower expenses, which fell 3.93% due to lower raw material bill.

The higher net profit was also on account of a lower tax bill - down by 60.45% - and higher other income at 5.84%. More relevantly, profit before tax was down 12.81%.

FMCG major Dabur reported a modest and broadly-in-line quarter with a 4.8% domestic volume growth and 5% value growth; however, the growth wasn't as broadbased as in Q1FY20. Hair oils, skin and foods posted weak growth during the September quarter.

For Emami, the domestic business continued to be weak with growth across most core brands declining. The company’s sales growth of 5% was driven by a 20% growth in the international business.

That consumer spending remained weak was evident as Titan posted an overall numbers with a 1% y-o-y revenue growth, 3% Ebitda growth (down 7% y-o-y in underlying terms, 4% below estimates) and a 6% y-o-y drop in recurring profit after tax (16% below estimate). The weakness was due to sluggish performance of jewellery and watch divisions.

Mahindra & Mahindra and MVML's consolidated net profit declined 24% at Rs. 1,355 crore on the back of continued slowdown in the sector, leading to decline across segments. Revenues from operations fell 15% at Rs. 10,935 crore against the same period last year.

Earnings before interest, tax, depreciation and amortisation (Ebitda) saw a y-o-y decline of 16.7% at Rs. 1,541 crore.

M&M's overall sales during the quarter fell 16% on a y-o-y basis to 1,91,390. "The Indian economy continues to cope with suppressed consumer sentiment and a continuing liquidity crunch, which coupled with the high consumer finance rates due to non-transmission of repo rate reduction, is impacting demand," the company said.

M&M managing director Pawan Goenka said this is the first time since 2001 that the auto industry has witnessed two consecutive quarters of decline across segments.

Tata Steel reported a loss of Rs. 6.54 crore before tax on a consolidated level versus a profit before tax of Rs. 5,411 crore in the same period last year. The company's weak performance was on account of lower realisations during the quarter, which were down by Rs. 4,000 per tonne sequentially.

Koushik Chatterjee, group ED (finance and corporate), said the company's performance came amidst a challenging economic environment which saw steel prices drop by over $100 per tonne. The company had revised its capex guidance for FY20 in the first quarter of the financial year from Rs. 11,000 crore to Rs. 8,300 crore. He further said the company could go in for recalibration of the capex further. "Capex during the quarter stood at Rs. 2,325 crore and half year stands at Rs. 4,985 crore. Capex numbers will see a sharper reduction in the coming quarters as we recalibrate and reprioritise our capital expenditure in line with market conditions," he added.