ON THE RISE AGAIN India Inc earnings to hit six-quarter high in Q3

 India Inc is expected to post its best earnings growth in six quarters in the October-December (third) quarter of the current financial year on the back of a strong performance by export-oriented sectors and a low base. 

    Profit after tax (PAT) of companies on the benchmark sensex is set to increase 13% year-on-year (y-o-y) to around Rs 55,000 crore during the quarter, estimates made by leading brokerages showed. PAT growth is expected to accelerate to 16% y-o-y in the fourth quarter (January-March) as earnings slowly move up to levels seen during the boom years. Though India Inc's PAT growth will still be lower than the heady 25%-plus increase seen between 2002-03 and 2007-08, it would be closer to the average of the past 10 years. 
    While growth was concentrated among a few sectors in the previous quarters, several sectors are expected to register gradual improvement in growth rates from the third quarter. "Downgrades to sensex EPS (earnings per share) have taken a breather," an analyst at Motilal Oswal Securities (MOSL) said. 
    The growth trend emerging from the quarterly results suggest that the worst may be over for India Inc in terms of earnings. After a 3% y-o-y degrowth in PAT in the quarter ending June 2013, profits at 143 companies covered by MOSL grew 8% y-o-y in the following quarter. 
    PAT growth is expected to be 10% y-o-y for these firms during the quarter ending December 2013. But this is still lower than the long-term average growth of 14%. Only around a third of these firms are expected to report a decline in PAT — the lowest level in 11 quarters. 
    "The worst is over for most of the sectors. The earnings are likely to be above expectations, especially in IT and commodity-related businesses," said Vikram Dhawan, director, Equentis Capital. Deven R Choksey, MD, KR Choksey Shares and Securities, said, "The earnings for the third quarter will be better." 
    Telecom, cement and automobiles sectors are expected to report growth after several quarters of decline. In fact, telecom, cement, media, real estate and retail are likely to emerge as the sectors logging the highest growth. 
    Sensex firms are likely to report 13% y-o-y increase in sales to around Rs 5 lakh crore.