New Delhi, A lacklustre festival season is set to greet India Inc. this year. The impact of a widespread slowdown in the economy is starting to show in the balance sheets of Indian corporates.
To make matters worse, projections for the coming quarters give no indications about a pick up in economic growth and sales.
From toothpaste makers to truck manufacturers, all are facing the pinch of the decline in private consumption. It is resulting in capacity reduction and job cuts.
Much of what has happened and what could be expected in the upcoming quarterly corporate earnings can be derived from the language of the company’s comments on the state of the Indian economy and their performance.
This is bad news for companies, especially in the fast moving consumer goods (FMCG), consumer durables, electronics and automobile sectors, as a substantial portion of their annual sales come during the festival months of September and October, stretching on to November.
JSW Steel, in a statement, said: “Weaker automotive sales volumes and consumer durables sales in recent months is a matter of concern.” Dropping clear signals about the impact of slowdown, the company said: “Indian economic activities during the quarter were underpinned by a general lack of credit availability, resulting in muted business sentiments across various consuming sectors”.
Describing the current market situation as “unprecedented”, Tata Motors said “with the budget announcement and upcoming festive season, we expect some tail winds for the remaining FY20”.
India’s largest commercial vehicle maker, Tata Motors has nearly double its loss in the June quarter over the same period last year, saying that “domestic auto industry has declined sharply and significantly”.
The country’s largest passenger car maker Maruti Suzuki said that the demand envi ronments is “uncertain”. The company saw a 27.3 per cent decline in its year-on-year (y-o-y) net profit.
Ambuja Cement too said that “pace of construction activities slowed down due to liquidity issues in the market and weak demand”. In its outlook, it said that the government’s current budgetary allocation i n infrastructure development, construction of concrete roads, interlinking of rivers, irrigation projects and affordable housing is expected to have a favourable impact on cement demand.
FMCG giant Hindustan Uniliver, which saw a significant decline in sales volumes during the June quarter said that “the near term demand will remain subdued given macroeconomic conditions.”
Rural sectors, which constitute one-third of Hindustan Uniliver’s market, was the key reason for the company’s tepid performance. The revival of the distressed sector would be a positive for the FMCG sector.
One of India’s largest automotive coating companies, Asian Paints said their automo tive coatings JV (PPG-AP) business was affected by the “severe slowdown” being witnessed in the automobile industry.
“Even the Industrial Coatings JV (AP-PPG) business was impacted by demand slowdown. Benign raw material prices, however, supported the margins for the entire coatings business,” it said.
