Financial Daily from THE HINDU group of publications
Monday, Nov 18, 2002
Financial Daily from THE HINDU group of publications Monday, Nov 18, 2002 |
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Corporate
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Performance Mid-size companies perform better G. Madhan
BETWEEN Larsen & Toubro (L&T) and Motor Industries (MICO) which company would you think has shown a higher growth rate in profits in the second quarter of the current fiscal? If you had thought it was L&T, you would have guessed wrong. L&T, the engineering and cement conglomerate, had managed a growth rate in net profits of a mere 4.3 per cent in the latest quarter while the auto parts manufacturer, MICO, has registered a 95 per cent growth to its net profits. The case of MICO is no exception. It belongs to a category of companies that are neither too small nor too large and growth rate in profits of such mid-size companies have been superior to those much larger, in terms of turnover, during the latest quarter. An analysis of financial performance of a relatively large sample of companies reveals that this segment registered a net profit growth of 47.3 per cent, a rate that is significantly higher than the 23 per cent, registered by large non-oil companies to which L&T belongs.
The performance in the latest quarter is no aberration. In the last 3 quarters, such companies have shown higher rate of growth in sales as well as net profits. This segment consists of a portfolio of companies that include banks, pharma and engineering companies. Interestingly, moving down the size ladder does not always help. If the performance of companies in the present sample is anything to go by, it does not pay for a company to be too small either. Companies with a quarterly turnover of less than Rs 300 crore have managed a growth rate in profits of only 3.5 per cent in the latest quarter. The performance in the earlier periods has been no different.
The only exception in recent times has been that of oil companies for which size has been no handicap when it comes to profit growth. But then oil companies have the advantage of profits driven by inflation in crude prices.
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