The net profit of the 284 companies and banks that have declared their results for the quarter ended September 30, 2006, rose 31.23 per cent.
The figure would have been 65.96 per cent but for the less-than-stellar show by oil and petrochemicals companies. The 0.8 per cent growth in the net profit of state-owned Oil and Natural Gas Corporation and the 9.2 per cent in that of Reliance Industries, India's largest private company, pulled down the average growth rate.
If the two are excluded, India Inc would have surpassed all its previous earning records in this quarter. The drivers of growth have been software, cement, pharmaceuticals and steel companies.
The early birds that have declared their results have reported a sales growth of 32.01 per cent. The same set of companies had recorded net profit growth of 25.20 per cent and sales growth of 33.20 per cent in the previous quarter ended June 2006.
In other words, the non-oil companies' profit growth rate has gone up sharply in spite of a marginal slowdown in revenue growth.
The growth in profitability is significant against the backdrop of rising interest costs for the third successive quarter. The interest cost of these companies rose by over 25 per cent.
The stock market, reacting to the oil and petrochemicals companies' performance, indulged in rampant profit booking and pulled down the benchmark BSE Sensex by 134 points to 12,723.59.
However, market experts said the "correction" would be short-lived. "The market is consolidating and the correction phase seems to be over. There are buying interests and the Sensex will hit 13,000 in due course," said Deven Choksey, managing director, KR Choksey Share & Securities.
The operating margin of non-oil companies has risen 130 basis points (one basis point is one hundredth of a percentage point) while their net profit margin has gone up by 229 basis points. However, when Reliance Industries and ONGC are included, the operating margin has come down by 150 basis points while the net margin has fallen 8 basis points.
Cement companies have put up a good show with the net profit of eight of them rising 480 per cent on the back of a 51 per cent rise in sales. The operating margin of cement companies rose from 16.56 per cent in the quarter ended September 2005 to 30.84 per cent during the corresponding quarter this year.
Apart from cement, the pharmaceutical (net profit up 75.17 per cent), software (net up 53.97 per cent), steel products (net up 123 per cent) and textile (net up 58.22 per cent) sectors contributed to the healthy second quarter performance of India Inc.
