IT Companies Improve India Inc's Operating Profit Margins In Q1

India Inc has seen a healthy improvement in operating profit margins in the quarter to March, led by IT companies that have reported an eight-quarter high expansion owing to easing of manpower costs, according to an analysis by ET Intelligence Group of the first 100 companies which have announced results. The analysis does not include banking and finance companies since they have different reporting norms and also petroleum companies because their sheer size will have a disproportionate influence on the aggregates.

Yet, the aggregate net profit of the companies, at 16.5% of net sales, is the highest over the past eight quarters. The group’s revenues grew to Rs108,880 crore, an acceleration of 13.9% over the previous year and faster than the 12.7% growth posted in the previous quarter but slower than the July-September quarter that saw a sharp depreciation in rupee and significantly benefitted IT players. The share of other income, or the income from non-business sources such as investments, rose sequentially to 13.9% of the group’s gross profit, or profit before depreciation, interest & tax (PBDIT).

Ten Companies Doubled Profits

Ten companies posted more than double profits for the quarter. Hyderabadbased Oil Country Tubular, which supplies drilling pipes to petroleum producers, posted the biggest jump (of 65 times) in its quarterly profit to Rs14.9 crore following a mammoth 2,450-basis points increase in operating profit margins.

In all, 43% of the companies reported an expansion in operating profit margins compared with the year-ago period. Tata Metaliks, Tata Elxsi, Reliance Industrial Infra, Biocon and UPL were among the significant gainers during the period.

Two-thirds of the companies reported growth in net sales over the previous year. Power transmission and distribution player Emco posted the highest sales growth of 93.8% to Rs328 crore while Eimco Elecon, Granules India, Liberty Shoes and Cera Sanitaryware were some of the other companies that reported high revenue growth.