Corporate India has shown signs of recovery as the earning season for the first quarter (Q1) of the financial year 2019 have posted strong results. The results posted for the April-June 2018 quarter of 102 companies have witnessed a net profit of 14.3 percent on a year-on-year (YoY) basis.
This is the fastest growth pace recorded in the last nine quarters. The data does not include banks, financial services firms, and oil and gas companies as they have a different business model or cycle.
The numbers are encouraging for the economy as it recovers from the lingering impact of the rollout of the Goods and Services Tax (GST). The volume growth was thriving due to the increase in the overall consumption but the profitability of the corporates came under pressure because of the rupee depreciation and high crude oil price.
The first quarter of FY19 so far has been driven by IT and FMCG players. These two sectors together contributed 83 percent to net profit and 66 percent to the net sales. The sectors also registered double-digit growth in sales and profit against the drop it witnessed last year in the same quarter.
Growth got an impetus from a favourable base effect and better-than-expected show by Tata Consultancy which contributed for 28.5 per cent all incremental profits made by the companies who have posted their results till now.
The growth had severely hampered in the first quarter of Financial Year 2017-18 as the traders and consumers had postponed new orders due to the roll scheduled roll out of the GST from July 2017.
In a response to a query by Mint, ICICI Securities Ltd informed that in the last six months ended on June 30, key indicators showed that the growth has picked up the pace. Although it's a positive sign for the economy there is an element of base effect to this high growth, which cannot be ignored.
The FMCG sector is further expected to pick up the pace with the recent cuts in GST rates and an above average monsoon.
