MUMBAI: Early trends in quarterly results show resilient double-digit growth in aggregate net profit aided by the recent corporate tax cut. However, lacklustre single-digit revenue growth reveals lower demand. A sample of 69 companies that declared results for September quarter reported a 12.5% year-on-year rise in aggregate net profit, the highest in five quarters. But, revenue grew at a five-quarter low of 5.6%.India Inc’s topline has been under pressure due to weak demand and is expected to remain in single digits for the second quarter. “The slowdown in consumption demand is reflected in the Reserve Bank of India’s Consumer Confidence Index as well that declined to 89.4 in September 2019 compared with 95.7 in July 2019,” said India Ratings in a recent report.

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The operating margin of the sample showed a small improvement of 20 basis points yearon-year to 16.5%.Analysts ScepticalBut analysts remain sceptical of any major improvement after the majority of companies declare results for the quarter.“In Q2FY20, although corporates would have lower base of profits (in the year-ago quarter), lower operating leverage in Q2FY20 (due to slow demand) would mean that margins may not show a jump,” said Deepak Jasani, research head, HDFC Securities.Excluding banks and finance companies, growth in revenue and net profit tapered to 4.9% and 10.5%, respectively. This implies an improved year-on-year performance by banks.Though the cut in corporate tax is expected to help India Inc report better profit growth, it will be too early to estimate the extent of the benefit since the numbers so far are skewed by Reliance Industries, the country’s largest company by profit, and information technology (IT) companies. For instance, at ?3.1 lakh crore, RIL alone accounted for half the sample’s revenue and nearly 36% of its net profit. It reported record net profit of ?11,262 crore, up 18.2% year-on-year, the highest growth in at least five quarters.The 11 IT companies that have declared results so far reported a slower quarter at the aggregate level on account of softer demand from global banks and capital markets, which constitute over half the total revenue of the sector. Aggregate revenue rose 6.6% compared with growth of 17.9% in the year-ago quarter while net profit growth slowed to 4% from 13.6%.Together, RIL and IT companies constituted 78.5% of the sample’s revenue and 83.7% of its net profit. As more companies declare results in the coming weeks, the trend will become clearer.