SPRINT TO FINISH
Business Today|May 16, 2021
CORPORATE EARNINGS GROWTH IS LIKELY TO ACCELERATE IN THE LAST QUARTER OF FY21, BUT RESURGENCE OF COVID CASES COULD CLOUD THE OUTLOOK FOR FY22
NITI KIRAN
AS India Inc’s January-March quarter results for FY21 trickle in, early birds bring good tidings of robust earnings momentum. Companies look set for a strong show in Q4 on a low base in the previous fiscal. However, the recent surge in infections and sporadic curbs by states could prove to be a dampener for the earnings story in FY22.

IT bellwether Tata Consultancy Services (TCS) kicked off the fourth-quarter earnings season on April 12 with a 14.9 per cent year-on-year growth in consolidated net profit and a 9.4 per cent increase in topline. Infosys and Wipro followed with double-digit growths in consolidated profits at 17.5 per cent and 27.7 per cent, respectively, and 13.1 per cent and 3.4 per cent increase in revenues. These numbers could be the harbinger of a healthy earnings season in a year ravaged by the pandemic.

Earnings Estimates

Analysts believe the base effect due to a sudden lockdown in March ’20 and cyclical sectors such as metals, banks and cements would lead the earnings acceleration. “Q4FY21 is expected to be a stellar quarter representing the continuation of a sequential recovery, driven by a gradual economic re-opening and robust demand reflecting a strong pick-up in cyclical sectors. The positive earnings momentum of the last two quarters is likely to sustain in Q4, led by a sharp demand revival across segments. This is further supported by the lower base of last year,” says Neeraj Chadawar, Head, Quantitative Equity Research, Axis Securities.

Sanjeev Prasad, Co-head, Institutional Equities, Kotak Institutional Equities expects net profits of BSE-30 companies to increase 55 per cent y-o-y and 6 per cent quarter-on-quarter (q-o-q) and for the Nifty 50 ones to increase 125 per cent y-o-y and 8 per cent q-o-q. “BPCL, IOC and Tata Motors — which had reported huge losses in Q4FY20 — are not a part of the 30-scrip Sensex, while they are very much part of the Nifty 50, accounting for the large divergence in performance of the Sensex and the Nifty,” he adds.

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