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Q3FY21 earnings: A bright spot in economic recovery

Q3FY21 earnings: A bright spot in economic recovery

The aggregate sample of 2,450 companies saw net sales growth of 2.7 per cent in the quarter ended December 2020 compared against sharp fall of around 25 per cent and around 4.5 per cent in the preceding two quarters

Net profits of the companies witnessed a profound improvement of 67 per cent, year-on-year. Net profits of the companies witnessed a profound improvement of 67 per cent, year-on-year.

A healthy rebound and robust corporate performance in the third quarter is just what the doctor ordered.  The aggregate sample of 2,450 companies saw net sales growth of 2.7 per cent in the quarter ended December 2020 compared against sharp fall of around 25 per cent and around 4.5 per cent in the preceding two quarters. Net profits of the companies witnessed a profound improvement of 67 per cent, year-on-year. However, one needs to read the positive growth number in Q3-FY21 with caution owing to the low base effect, said a CARE Ratings report. "These were on account of improvement in net sales coupled with cost rationalisation in some expenditures like raw material costs, power cost, interest cost. However, employee cost, operating & manufacturing expenses and tax expenses have seen an uptick, which has capped the overall improvement in net profits," it added.  

Around 1,361 companies, which account for almost 70 per cent of the net sales in Q3FY21 have delivered a positive growth. The growth in total expenditure has been on account of double-digit growth in operating and maintenance expenses (18.5 per cent) and pick-up in employee cost (8.1 per cent). The pick-up in total expenditure at the aggregate level does indicate that the cost rationalisation undertaken by corporates during the first two quarters of the fiscal have been reversed to some extent, the report said. Operating profits of the sample companies recorded a double-digit growth of 12.2 per cent compared with 5.7 per cent increase in corresponding quarter last year. Operating profit margins have also improved from 20.9 per cent to 22.8 per cent during the period.

The net sales of 2,062 companies (excluding banks and finance) registered a growth of 2.4 per cent compared to a decline of 3.8 per cent in Q3FY20. Operating profits have recorded a sharp double-digit growth of 25 per cent against a decline 2.3 per cent in year-ago period. This led to a notable pick-up in the operating profit margins to 19.4 per cent, the report added.

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