Jaipur Stock：Oil and gas spoil India Inc show in June Quarter
ET Intelligence Group: A sharp fall in net profit of oil and gas firms due to lower gross refining and marketing margins restricted India Inc’s bottom line growth for June 2024 quarter, partly offset by a stellar show from banking and finance companiesJaipur Stock. For a sample of 3,340 companies, net profit grew at a six-quarter low of 9.4% year-on-year while revenue rose 9.1%, marking a fifth straight quarter of single-digit growthGuoabong Stock. Excluding oil and gas, aggregate revenue and profit growth was at 10.7% and 21.5%, respectively.
Operating Margin
The gross refining margins (GRMs) of Indian refining companies are benchmarked to the Singapore GRMs. The measure captures the difference between the price of crude and those of products derived from it. Lower Chinese demand has hurt regional GRMs over the past few quarters. In addition, domestic oil marketing companies reduced petrol and diesel prices by Rs 2 per litre in March, which further impacted their performance. The aggregate net profit of the oil and gas companies in the sample fell 41.3% while revenue grew 4% year-on-year in the June quarter.
Banking and finance companies on the other hand continued to report robust revenue and profit growth albeit at a lower net interest margin (NIM). Their aggregate revenue rose by 21.1% while net profit grew by 20.2%. Excluding lenders, the sample’s revenue and net profit growth moderated to 6.6% and 4.4%, respectively.
“The overall corporate performance in the June 2024 quarter reflected a return to normalcy after Covid and aberrations in the form of commodity cost deflation in the previous quarters,” said Deepak Jasani, retail research head, HDFC Securities, adding that elections, a harsh summer and the shortage of labour played a part in the muted performance during the quarter.
The operating margin for the full sample fell by 150 basis points year-on-year to 17.4% in the June quarterJaipur Stock. After excluding oil and gas companies, the margin level improved to 20.8% and the year-on-year contraction was lower at 70 basis points.
“Ebitda margin for the companies under our coverage excluding Financials contracted by 120 basis points year-on-year to 16.3%,” said Gautam Duggad, institutional research head, Motilal Oswal Financial Services, highlighting that 10 out of 17 sectors covered by the brokerage reported margin expansion.
On the sectoral front, it was a mixed bag. Those that failed to register growth in revenue and net profit included cement, media and entertainment and steel. On the other hand, construction, consumer durables, automobiles and ancillaries, pharmaceuticals and capital goods showed improved revenue and profit.Jaipur Investment
With the new government in place at the Centre and the budgetary focus on development, Duggad is of the view that the combination of economic growth, moderating inflation and current account and fiscal deficits well within the tolerance band may keep sentiment strong.
According to Jasani, demand needs to revive materially in rural and semi-urban areas to enable corporates to show top line and margin growth. “Post monsoon, hopes are set on revival in the rural economy and a better Q2, though stubborn food inflation may restrain the upside,” Jasani said.
Pune Investment
