Contrary to the fears of economic slowdown taking roots during the current quarter, India Inc has paid more towards advance tax for the quarter ending September 2011, compared to the same quarter last year.
About 34 out of 47 companies for which advance tax payment figures are available with Mail Today, have paid more tax on Thursday than they did over a year ago, while 10 of them paid the same amount as they did last year, leaving only three in the negative pale.
This is one of the reasons for the buoyancy in the equity market on Thursday, when the BSE Sensex posted gains of 167 points to close at 16,876.54, a day ahead of the Reserve Bank of India's (RBI) mid-quarter review of monetary policy.
The equity and money markets have already discounted a 0.25 per cent hike in repo (at which RBI lends to banks) rate by the RBI on Friday, given the inflation measured by the wholesale price index (WPI) nearing the double digits in August - up 9.78 per cent over the same time last year. Firms have to pay their estimated tax commitments arising till the 15th of the last month of every quarter in advance on that day, and for the remaining 15 days, they can pay by the quarter-end. Investors see corporate advance tax payments as an advance indicator of corporate profits during the quarter for making their investment decisions.
These 47 firms have paid 18.52 per cent more tax for the quarter than they had paid a year ago, taking total payments in the latest quarter to Rs 15,035 crore. "Overall, advance tax figures reflect a better-than-expected corporate growth during the current quarter," said Ashish Kapur, chief executive officer (CEO), Invest Shoppe India. "Metals, banks and oil companies have paid more, even though some individual firms like Steel Authority of India Ltd (SAIL) and State Bank of India (SBI) have lagged," he added.
Taking the weaker industrial production figures and rising inflation, the market did not have high expectations on advance tax figures this time. Rising bank lending rates were also expected to eat into corporate profits. Sector-wise, the positive surprise has come from cement firms, where three out of four major firms paid more tax, while one has maintained the same level of last year's quarter. Oil and refinery companies were also fairly afloat, with big brother RIL paying about 67 per cent more.
Pharma and power companies were among the high payers, with Nuclear Power Corp Ltd paying 200 per cent more at Rs 150 crore compared to Rs 50 crore for the last year's quarter. Of the 14 banks only SBI (down 10.52 per cent at Rs 1,700 crore) and P&S Bank (down 26.67 per cent) have paid lower advance tax this quarter. Besides, four other banks - Bank of India, Dena Bank, Union Bank and ICICI Bank - have maintained their tax at the same level.
However, there is no big change in the top five tax payers with RIL leading the pack paying Rs 2,000 crore, followed by SBI (Rs 1,700 crore), LIC (Rs 1,160 crore), HDFC Bank (Rs 800 crore) and ITC (Rs 750 crore).