Minus telcos, India Inc's earnings grew by 28% in Q2

India Inc’s earnings grew by 28% year-on-year during the second quarter ended September excluding the telecom sector, which has seen a massive hit in its bottom lines.

The net profit of around 2,398 companies, not including telecom firms, stood at Rs 1.1 lakh crore, a growth of 28% over the corresponding quarter last year when it had clocked a net profit of Rs 85,929 crore, according to data compiled by CARE Ratings.

However, if the massive losses reported by telecom companies are taken into account, India Inc’s bottom line declined by 65% year-on-year — a level seen only once in the past when bad loan provisioning by banks had caused an astounding 81% decline in corporate earnings during the March quarter of FY2018.

During the quarter, telcos reported a whopping loss of Rs 79,759 crore, on the back of provisioning in the wake of the Supreme Court verdict, which directed telcos to pay their pending Assisted Gross Revenue (AGR) dues amounting to Rs 1.4 lakh crore.

During the quarter, 22 out of 62 sectors registered double-digit growth in their bottom line while 21 sectors saw their earnings contract.

“The losses recorded by telecom service providers aggregating Rs 79,759 crore in Q2-FY20 have been significant. On inclusion of the telecom industry in the list, the net profit growth (yoy%) of the sample drops by 65% as against a positive growth of 28% after excluding the telecom industry,” Madan Sabnavis, chief economist, Care Ratings said in a research note.

Sales hit

More than half of the industries saw their sales contract in the September quarter of the current financial year, indicating a prolonged slowdown in the economy.

Of the 62 sectors, 37 saw their sales contract by 2.5%. The sales of electrodes and welding equipment dipped by 57.8% during the quarter. The sales of trucks and light commercial vehicles (LCVs) dipped by 43.8%, while that of passenger cars dipped by 21.3%.

The contraction in auto sales has impacted the sectors that work closely with the auto industry as well. The sales value of the auto ancillary industry dipped by 21.5%. The automobile industry, which includes many other sectors, saw its sales value dip by 22% during the quarter.

The slowdown has also taken a toll on the housing market compared to its performance last year.