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India Inc profit growth stays buoyant in Q2 — Margins decline, tax incidence rises

Suresh Krishnamurthy

PROFIT growth of non-oil, non-banking listed Indian firms has stayed robust in the quarter ended September 2005. Aggregate profits of 2,150 non-oil, non-banking firms have risen 26 per cent over the corresponding quarter of the previous year.

Growth in "other income" of 21 per cent, robs some sheen off the performance. Profit growth is also lower than the 56 per cent growth reported in the corresponding quarter of the previous year. Still, the rate of growth is quite impressive considering the higher base.

Besides, sales growth at 16 per cent was almost as strong as the 21 per cent recorded in the comparable quarter last year. In addition, 847 firms reported profit growth in excess of 30 per cent and 444 firms reported losses. The comparable numbers for the previous year are 691 and 536.

There are, however, signs that the story of expanding margins and higher return on net worth may be largely over. This is because there is a slight decline in operating margins.

In addition, taxes are also rising. Benefits from tax shelters appear to have come down as in the case of SAIL, which no longer enjoys the protection of losses made in earlier years.

Companies from industries such as sugar (Balrampur Chini), construction (Hindustan Construction), textiles (Arvind Mills), chemicals (Colour Chem), shipping (GE Shipping), power equipment (ABB), mining (National Mineral Development) and information technology (Infosys Technologies) reported significant growth in profits.

Companies from sectors such as carbon black (Phillips Carbon), steel (Ispat Industries), broadcasting (Zee Telefilms), healthcare (Nicholas Piramal), aluminium (National Aluminium), power producers (NTPC) were some of the under performers.

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