Reflecting continued growth in their profitability, India Inc has paid more money towards taxes for the current quarter - October-December 2010 - with about 15 companies out of the total sample of 72 companies for which Mail Today
has data, paying over 50 per cent higher tax than they did during the same quarter in the previous year.
For the 72 companies, the total advance tax paid till December 15 amounted to Rs 14,098.5 crore compared to Rs 11,826.5 crore paid by the same companies during the previous year's quarter, up 19.21 per cent. These added to the strong industrial growth figures that came out in the recent months, confirming a stronger growth trend ahead.
Companies 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 taking their investment decisions.
Over two years after Lehman Brothers collapsed in September 2008, India's corporate sector is booming, supporting the market sentiment by taking the bellwether BSE Sensex above the previous peaks during the current quarter.
Deven Choksey, managing director of KR Choksey Shares and Securities, said, "The numbers are in line with expectation reflecting the continued good performance of the companies. Auto and IT sector companies have done well, while cement companies suffered as expected."
Of the 72 companies, only 24 companies paid less than what they did for the last year's quarter, two paid almost the same, while the remaining paid more than what they did in the previous year's quarter. Only four of the 72 companies paid over 50 per cent less than what they had paid in the previous year's quarter.
Commenting on the advance tax figures, Alex Mathews said, "Construction activity suffered the most due to unseasonal rains during the quarter-ending December, affecting cement and steel offtake."
Monsoon continued into October and November in several states, including in Kerala, Andhra Pradesh, and Maharashtra. Infrastructure activity was also affected severely during the quarter due to this development.
Though domestic banks have paid more tax compared to the previous year's quarter, they have failed to surprise the market this time. However, there were some setbacks in the advance tax payments by foreign banks.
For the banking sector, profitability was not in doubt, said Mathews, adding that the main problem haunting the banks and other financial services companies was non-performing assets (NPAs).
The rising interest rate scenario, lead by higher deposit rates offered by banks now, is expected to work against banks' interests. Banks make a lot of treasury profit in a falling interest rate scenario. Public sector MRPL has paid over 200 per cent more tax during the quarter compared to the previous year's quarter, while IDBI Bank, Man Industries and Tata Motors have paid more than 100 per cent higher tax.
Cement majors ACC, Ambuja Cement and Grasim Industries led the losers' pack by paying over 50 per cent less than what they did in the previous year's quarter.
SBI, RIL, LIC, Tata Steel and HDFC were the leaders in terms of the absolute amount of tax paid.