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Updated on: Wednesday, May 29, 2019, 08:11 PM IST

Slow demand to impact FY20 earnings

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Mumbai: Cautious commentary by consumer-focussed companies on demand may force equity investors to temper their expectation of double-digit earnings growth in 2019-20 (Apr-Mar), even though Jan-Mar earnings reported so far have seen more hits than misses. Of the 68 companies in the Nifty 200 index which have reported Jan-Mar earnings, 26 met estimates of net profit, while 22 surpassed and 20 belied them.

For net sales, 48 met estimates, 12 outpaced and eight missed, data compiled by Cogencis showed.  Analysts, however, have been forced to slash earnings estimates for 2019-20 (Apr-Mar) for consumer companies, which were among the primary drivers of corporate earnings growth last year.

Hindustan Unilever, India’s largest fast moving consumer company by market capitalisation, said it sees the moderation in rural demand continuing in the short-term, after recording the slowest sales volume growth in six quarters during the quarter ended March.

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Low farm income, deferment of purchases because of General Elections, fears of below-normal monsoon and liquidity shortage at non-banking finance companies, which has seen them curb lending, are weighing on domestic demand, experts said. Maruti Suzuki is not certain if demand will pick up immediately after Lok Sabha election results. Other automobile companies such as TVS Motor and Hero MotoCorp were not upbeat in their commentary either.

The expected increase in prices of vehicles, due to Bharat Stage VI emission norms, is seen marring automobile sales, which are already reeling under the impact of abnormally high dealer inventory over the past three months.  Real-estate developers, non-banking finance and housing finance companies have already started witnessing a fall in profits as the prevailing liquidity crunch in the banking system continues to hit their day-to-day operations.

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Published on: Tuesday, May 14, 2019, 02:30 AM IST
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