December quarter performance of exporters, domestic firms shows deep divide

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Profit of dollar-denominated firms in the Nifty grew much faster than other firms in the index in the December quarter




It’s déjà vu. The weak local currency is at work again. In the December quarter, the companies that make up the Nifty index of the National Stock Exchange saw a growth of 14% from a year ago in profit after tax (PAT), the highest growth since the June 2012 quarter.

But that average hides a deep divide between companies that derive earnings and revenues in foreign exchange (dollar-denominated companies, to use the terminology of broking firm Motilal Oswal Securities Ltd) and the others. As in the previous quarter, exporters continued to drive growth in revenue and profit.

PAT of dollar-denominated companies in the Nifty grew much faster at 37% than other firms in the index, which saw PAT growth of merely 1% (see chart). In fact, profit growth for dollar-denominated companies was even higher than the 29% seen in the September quarter.

Rajat Rajgarhia, managing director (institutional equities) at Motilal Oswal Securities, said, “Companies benefited from a sequentially stable currency, which meant lower or nil mark-to-market losses in the December quarter.” Export-led sectors such as auto, technology and healthcare reported their highest earnings over the last 21 quarters.

Dollar-denominated companies reported strong sales growth as well. As Motilal Oswal Securities pointed out in its results review, dollar-denominated Nifty companies’ sales increased by 22% while the rest of the Nifty firms saw a much slower pace of sales growth at 6%.