As Q1 profit growth retreats, can India Inc. hold its head above water?

livemint.com:

Mint analysis of 1,475 BSE-listed companies that reported their financial results by Friday showed a 9% year-on-year increase in their combined revenue and a more modest 5% rise in net profit. While revenue growth was still one of the best in a year, the string of consistent sub-10% figures in this period could keep India Inc. tense.

A relatively higher base in the previous year also hurt net profit growth. Other factors such as rising input costs due to higher global commodity prices, weak global demand and a sluggish rural consumer market were also a drag. The performance got a fillip from the banking, financial services, and insurance (BFSI) sector, excluding which net profit contracted 3.3% from a year ago—the second consecutive quarter of decline—while revenue grew almost 6%.

Madan Sabnavis, chief economist at Bank of Baroda, said the absence of demand revival, inflation, and limited government expenditure affected sales and consumer demand. He expects an improvement by the December quarter as demand recovers and inflation eases. A likely better monsoon harvest should also help lift rural consumption.

The net profit of large companies declined after a downward trend for at least a year, while it was the mid-sized players (revenue between ₹1,000 crore and ₹10,000 crore) that led both profit growth and revenue growth. A sectoral analysis, too, uncovers a diverse earnings picture. Of the 18 broad sectors tracked by Mint, seven—media and entertainment, oil and gas, power, chemicals, agriculture and allied sectors, metals and mining, and construction—posted a decline in aggregate profit from a year ago.