Large companies made a killing in Q2 despite Covid concerns: CMIE

Despite the perception that lockdown wrecked Indian corporate sector, listed companies seem to have garnered record profits in the quarter ended September 2020, CMIE has said. Lockdown hit the top line of listed companies but not their profits, the article written by Centre for Monitoring Indian Economy (CMIE) CEO Mahesh Vyas, says.

The listed companies' topline declined 27.3 per cent YoY in the quarter ended June. Partial data for the quarter ended in September suggest a decline of 5.7 per cent YoY. The net profit declined 74.7 per cent in Q1 but recorded a multi-fold growth of 263 per cent in Q2. The data was derived analysing Q2 financial statements of 1,897 companies available on CMIE's Prowess database as of November 11.

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The think tank has said the companies' Q2 performance seems to have reversed a substantial slide in profits in the preceding quarters. Interestingly, the sharp increase in profits during Q2 is not concentrated in only a few large firms but is quite widespread. Of the 1,897 companies analysed, a substantial 236 companies (around 12.4 per cent of the total) hit their best profits performance in 30 quarters or six years.

Vyas said these companies collectively generated Rs 1,33,200 crore net profit during Q2. This is the highest net profit generated by these listed companies during any quarter in the past. In fact, it is 25 per cent higher than the highest profit ever made -- Rs 1,06.6 crore in the quarter ended June 2019 -- by these companies in any past quarter, he said.

These companies made only Rs 44.1 crore profit in the June 2020 quarter and Rs 32 crore in the March 2020 quarter. Their average quarterly profit in the past four quarters was Rs 50 crore. The think tank cited "extraordinary transactions" for record rise in the September 2020 quarter's profits. Aggregate net profit, net of prior period and extraordinary transactions (PAT net of P&E) during the quarter ended September 2020 was lower, at Rs 1,25,700 crore. Even this was at a record high. It was also over 25 per cent higher than PAT net of P&E of any past quarter.

Also, the fall in profits in Q1, which was the quarter of the most stringent lockdown, was not very severe. The aggregate net profit of the 1,897 companies analysed suggest they earned a profit of Rs 44,100 crore and PAT of Rs 72,900 crore. In the quarter ended March 2020, aggregate net profits stood at Rs 32,000. These were much worse than the performance in the June 2020 quarter. Also, the worst quarter was, in fact, April-March 2018, when profits were down to around Rs 25,000 crore. This is also true for all listed companies.

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