Input prices, gradual gross sales crimp India Inc earnings

From Biocon, Maruti Suzuki, Nestle, Dr Reddy’s Labs and TVS Motors to a bunch of smaller corporations like Crompton Greaves and Rallis, outcomes for Q1FY22 have barely met the Street’s expectations. However, producers of metals like JSW Steel have seen their earnings soar whereas IT gamers have completed fairly effectively. Larsen & Toubro reported a very good set of numbers with the engineering behemoth seeing an uptick in ordering prospects.
The Q1FY22 numbers have to be learn within the context of the very weak base from a year-on-year perspective and a barely robust base impact on a quarter-on-quarter foundation. Net gross sales have fallen sequentially each for shopper and industrial companies, not shocking given the native lockdowns throughout the nation through the quarter.
At TVS Motors, revenues declined 26 per cent q-o-q whereas at Crompton Greaves, they have been down 28 per cent as lockdowns impacted revenues. Maruti Suzuki volumes fell 28 per cent q-o-q. UltraTech reported a 23 per cent q-o-q drop in volumes whereas at JSW Steel, they have been down 11 per cent. Gross margins for a bunch of corporations have been underneath stress as uncooked materials prices remained excessive. At HUL, for example, gross margins fell 140 bps y-o-y to 50.4 per cent driving down Ebitda margins by 115 bps y-o-y.
What stands out is that even after the appreciable price slicing in FY21 corporations proceed to eke out financial savings by trimming bills. At Vedanta, for example, prices have been muted throughout divisions.
The concern is that rural demand may not be as resilient as within the final couple of years, given many areas have been badly hit through the second wave. Lenders like Mahindra & Mahindra Financial Services, which have a good bit of publicity to rural India, are reporting weak numbers.