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Cost cuts, other income prop up Q4 margins

BS Research Bureau

Early numbers for the quarter ended March 31, 2002, indicate that the margins of India Inc have improved on the back of cost-cutting, other income and lower interest burden.

The 72 companies that have so far unveiled results for the quarter have reported an aggregate 3.35 per cent increase in net profit to Rs 10.46 billion, and a marginal 0.51 per cent rise in sales to Rs 93.48 billion.

Cost-cutting measures, along with a 21 per cent growth in other income and a 22 per cent drop in interest payment, saved them the blushes.

Consequently, margins darted up in the operating and gross profit categories.

Operating profit margin for the 72 companies rose from 19.04 per cent to 20.11 per cent, while gross profit margin increased from 16.23 per cent to 17.93 per cent.

Net profit margin, on the other hand, rose to only 11.19 per cent from 10.9 per cent.

One reason for the pared bottomline is the provision for deferred tax made by the companies during the quarter.

Of the 72 firms, it was the top 10 by sales that skewed the aggregate performance. These companies accounted for 98 per cent of the aggregate net profit and 82 per cent of sales.

Six of the top 10 companies -Hindustan Lever, Hero Honda, Infosys Technologies, National Fertiliser, SmithKline Beecham Consumer and Marico Industries - managed to improve operating and gross profit margins during the quarter.

The aggregate net profit growth was lifted by the performance of Hero Honda (172 per cent growth) and National Fertilisers (248 per cent). A better-than-average performance by Infosys Technologies (15.8 per cent) and Hindustan Lever (11.6 per cent) added to the combined numbers.

On the sales front, Hero Honda, Infosys Technologies and HCL Infosystems reported a better-than-average 1 per cent growth.

Though Wipro managed a sequential 8.5 per cent growth in volume, its topline and bottomline data reflected pricing pressure.

The same was with fast moving consumer goods companies. Hindustan Lever saw a 10 per cent drop in sales, Marico saw a puny 0.9 per cent growth and SmithKlineBeecham Consumer managed a paltry 0.4 per cent growth.

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