India Inc. is finally starting to report the kind of growth one would expect from companies in the world’s fastest-growing large economy.
India’s biggest companies have been stuck in a rut for the last two years even though the country surpassed even China in terms of gross domestic product growth and it voters picked a prime minister who pledged to boost business.
Last quarters’ earnings suggested things may at last be looking up.In the three months ended June, the net profit of companies in the benchmark index, the S&P BSE Sensex, rose 7% compared to a year earlier. While a few companies still haven’t announced results yet, so far it looks like the highest growth for Sensex companies in two years.
Take out the earnings at banks–which are being hurt as the Reserve Bank of India forced them to write off more soured loans–and the profit picture is even prettier. Profit at the non-financial Sensex companies jumped 15% during the quarter, according to data from broker Motilal Oswal Securities Ltd.
While the outlook on global demand is gloomy, hurting exporters and software companies, local demand is strong and getting stronger.
Workers at an IKEA carpet-making facility in Bhadohi, India, August 26, 2015. PHOTO: VIVEK SINGH FOR THE WALL STREET JOURNAL
“The earnings growth mostly came from companies focused on domestic demand rather than companies relying on global markets,” said Vivek Mahajan, head of research at Aditya Birla Money.
Companies selling products to people in India can expect even more demand later this year as above-average monsoon rains bolster farmers’ incomes and government employees receive a massive wage hike, he said.
Sectors such as cement, consumer goods, and auto makers are going to be big beneficiaries of the rising consumer demand.
Source: Indian Company Earnings are at Last Showing Some Signs of Recovery – India Real Time – WSJ
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