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Unimpressive quarterly earnings results show cost pressures

Sales growth of the 415 companies that have declared their results so far, have been excellent but their margins have been squeezed, leading to very poor profit growth

A Moneylife research has shown that the latest quarterly earnings have been subdued. Sales of 415 companies in our sample which have declared results so far for the final quarter of the 2012 fiscal, increased by 19%. Although the sales increase was excellent, it wasn’t enough to boost operating profits, which went up by only 3% while net profits showed a marginal increase of just 4%. Hardly impressive at all.


Overall, India Inc’s net profit margins have shrunk, from 11.30% to 9.85%, a 145 basis percentage points decline. Out of the 415 companies taken for consideration, over 60% of the companies saw their quarterly net profit margins shrink, year –on-year, which is a high percentage. This is despite four out of five firms saw recorded sales increase. This clearly shows cost pressures.

The stock markets shot up in Jan-Feb period, hoping for improved profit growth. When this realisation set in, in late April, stocks started going down. The Sensex is up only 4.50% since the beginning of the year. Usually the market will factor in future expectations well in advance, and Sensex at one point of time was up 18.76% when the European crisis was at its peak. Clearly, the market has misread not only the earnings but the situation in Europe seems to have worsened.

Among individual companies, Infosys had issued poor FY13 guidance. The stock tumbled 10% on the news. This is not surprising, but market took the opposite tack (i.e. it was surprised) and should have factored the future well in advance.

Reliance Industries reported a decline in its operating profits and bottomline of 33% and 21.2% respectively. Bharti Airtel also reported a drop in net profit by 14% to Rs1,574 crore, due to increased cost and poor sales (only 9% increase).

Another company which has reported poor results was Hindustan Zinc, which saw its net profit shrink by nearly 10% year on year, to Rs1,412 crore, due to lower zinc prices.

On the brighter side, we have Hindustan Unilever which posted strong sales increase of 16% to take its topline to Rs5,765 crore. We had written a story on this earlier, and the same can be accessed here: (Hindustan Unilever’s strong margin expansion shows consumption is one bright spot in the Indian economy).

Tata Consultancy Services, also reported good results after its sales increased 30% to Rs10,371 crore during the quarter. It became the first Indian Information technology (IT) company to cross the $10 billion threshold, when it posted annual revenues of $10.17 billion. 




5 years ago

A very good analysis indeed but, pardon my saying so, rather lopsided too as the entire emphasis is on profit-maximisation at the cost of the larger interest of the country's urgent economic needs. True, business is NOT tantamount to charity, but can business houses of a country really ignore the people at large of their own country (I mean the country where the business is located)? Big business must shed its tradesman's attitude of the 16th and 17th centuries and make the so-called "corporate social responsibility" inter alia of employment generation, etc., as reality.

When the going gets tough, airlines get stingy!

“It’s the economy stupid,” said an airline executive I know. While innovative ways to price various services is the global airline model these days, there are days it gets too much and some of these are ahead of us!

Airlines are in dire straits in India but that is something we all know. No one is helping them stay afloat is also well-known. The recent service tax on flying adds to the government’s coffers, while the zooming airport charges are bringing on more fees on the passengers to keep the airport operators happy. After all, airlines are left with no choice but to operate from various airports so they have a monopoly in their respective markets.

However, with plummeting profits the airlines are getting ready to nickel and dime for each and every service they offer, and if you really want to save some money, you should keep an eye for these charges and avoid them!

First of all, let’s pick the biggest airline in the Indian market. Jet Airways and JetKonnect have recently put out a slew of new charges which have left their passengers unhappy. Their first moves were on their frequent flyers, who also held their co-branded credit cards with Citibank. One fine day in September 2011, Jet Airways/Citibank almost doubled the bar on spending which would get them one free upgrade coupon from the airline. Next, they imposed a Rs150 transaction charge per ticket, per passenger, per transaction to issue fresh tickets/ change tickets /refund tickets at a Jet Airways/JetKonnect ticketing office. And yes, even if you called them on their helpline, you are liable for this charge. I’ve used some bit of airline ticketing systems as a hobbyist, but I can’t imagine the workload would be so much as to have an airline make me pay for the salaries of their employees. Cancellation fees on tickets have gone up from Rs750 per segment to Rs950, and they’ve started charging for all sorts of requests such as “Travel Certificates”.

Next up, from 1st January 2012, they withdrew lounge access at 11 airports in India for their frequent flyers. In March 2012, when they claimed they were offering higher mileage on their frequent flyer program to all domestic segments, they credited about 20% less. The blame went straight away to a “system glitch” which has not been rectified yet. The problem here is that miles have a financial value on the liabilities side of an airline’s balance sheet, and they are taking less of it than they are responsible for.

The latest move has, however, left me wondering. Airports in India have a regressive requirement of the security forces sighting proof of travel before letting the passengers access the airport. The IATA, the governing body of air ticketing regulations globally, banished paper tickets since 2008. Therefore, you needed a printout of your e-ticket or boarding pass to access the airport. Not to mean this serves the purpose since anybody can create an e-ticket with a computer and printer at their homes and still access the airport. Jet Airways has now imposed a new Rs50 charge to give you a printout of your ticket at their offices (airport or city). Their clarification reads that this is extra work for their staff and hence passengers who need a new printout should pay for it.

Conceptually not a bad thought, but it leaves a lot of people high and dry for they would ideally like to access the airport with their tickets in their e-mail or smart phones, but airport operators and airlines are now trying to monetise this requirement.

And Jet Airways is not the only one at fault here. Kingfisher Airlines, running a very truncated schedule, has resorted to charging an excess baggage charge from everyone who is even slightly deviant of their published baggage guidelines. All the low-cost carriers already charge Rs50-Rs150 “per transaction”, but it has always been a part of their model from day one, so no one can fault them on those.

IndiGo, which is a professionally- run operation, has also resorted to some of these tactics as well. However, most of these don’t impact all of us at all times. Wheelchair assistance services for passengers who needed one used to be free at a point of time, and now have been made chargeable by them. For the record, other airlines, even low-cost ones such as GoAir and SpiceJet don’t charge for this service till date.

So, if we are missing Air India in this list, do take note, they are anyways surviving on the money we pay as tax-payers, it is simply great that they don’t charge all these ancillary fees. And after writing this for you, my only advise to you to have a reasonably-costed flight on your travels is: Be healthy, book early, don’t change your plans, pack light, travel with your ticket print-out and buy your own food before you get on the plane. Else, get ready to pay for every step of the way as you fly to your destination.

AJ writes a travel and aviation focussed blog from India at You can follow him at @livefromalounge on Twitter.




5 years ago

While there is no denying that airlines must also be making money and be profitable, they are definitely responsible to large extent for their recurring and ever growing losses. The business models followed by airlines, full service or low fare airlines, are questionable. They have consistently sacrificed profitability to increase market share not realizing that quoting lower than cost prices will not help them in increasing ever lasting loyalty of flyers. Flyers will always be looking for value. The attractiveness of the co branded cards have been reduced to a large extent by the airlines and the banks to manage their costs better. Flyers have realized that holding these cards no longer means any significant benefits will come their way.
Airlines are also guilty of cozying up with the government of the day for their sustenance. They should instead be in constant discussions with the various state governments as well as central government to stop treating aviation as LUXURY and remove the high taxation on fuel and other operations. Increased aviation activity is good for the local economy and the nation. A profitable aviation industry can can give rich dividends to an economy as proven by the rise of Emirates airlines and the positive effects it has had on Dubai.
At the same time, airlines must not fall in the trap of thinking that the Indian regulators or customers might not be as evolved to accept Euro style pricing.

Recent actions of airlines like Jet and Air India have alienated their distributors and commercial partners. There has been unbridled and misplaced arrogance on display while dealing with suppliers or distributors. They are almost a law unto themselve trying to dictate terms to all and sundry but still incapable of conducting profitable operations.
The government has also not covered itself in glory being hand in glove with the airport operators in increasing usage charges manifold. This likely is a fit case for a closer look by the CAG but considering that CBI continues to be a Govt puppet at best this would not result in any relief for airlines as well as customers.

I hope better sense prevails and we are able to experience a better aviation experience.

Jet Airways

5 years ago

Jet Airways does not insist on an eticket printout to enter the airport but this is a security requirement by the civil aviation authorities.

We observe a significant number of guests queuing up at our counters for re-prints of etickets due to which dedicated resources are being increasingly deployed. This last minute pressure for eticket reprints is also causing great inconvenience to our other guests who want to purchase tickets for immediate departures. We believe this increased cost of servicing of eticket reprints should be borne by only those who request for reprints and hence we have implemented the INR 50 charge. Jet Privilege Platinum members are exempt from this charge and we encourage all guests to get an eticket print at the time of ticket issuance.

Jet Airways is working together with the various stakeholders to provide seamless travel using mobile/bar code technology which will do away with eticket prints. We look forward to its implementation following regulatory approvals.



In Reply to Jet Airways 5 years ago

Dear 9W, thank you for writing in - it would be of interest as well as use to us if you could provide us with cogent details of steps taken or correspondence exchanged with MoCA, BCAS, AAI, CISF, MoHA or others on the subject of paperless access to airports and aircraft.

And one reason some of us take printouts from your counters is because your eTicket uses up a lot of ink, with all that fancy artwork and black sectors. A simple product, with ease of reading all the required fields, may help.



In Reply to Jet Airways 5 years ago

Makes sense. Thanks for the clarification


5 years ago

it seems absurd that police at entry check for e-tkt print-out & ID proof. anyone can print any ticket at home & show it with ID to enter (at least to save the ridiculous entry fees for public or to gain access on days when access to public is curtailed).
they can hardly validate if it is a valid PNR, because they don't have such a facility (even though it should not be hard to build).
the right approach would be to have your e-tkt print-out stamped/validated by the airline counter outside, which can then be checked at point of entry.
of course, this would burden the airline staff (who would prefer to remain idle) & thus you may see charges of rs 50 for validating your print-out...


5 years ago

Apt article, squeezing the passenger every inch of the way through our increasingly unfriendlier skies - tolls on access roads, user development fees, service charges, more taxes and now this printout charge.

In a day and age when paperless travel is the vogue, our civil aviation authorities would have us go back to the dark ages.

Here, for information, is the latest from Indian Railways - who went paperless on most options lately - Delhi Metro, reserved accomodation, tickets bought online . . .

Electronic Reservation Slip (ERS) - The printout in standard specified Performa containing reservation particulars, and instructions for use which can be used by the passenger along with the relevant authorized Identification, as travel authority for performing the journey.

Virtual Reservation Message (VRM) - A screen-shot of the e-ticket displayed through laptops/palmtops/ Mobile phone is referred as Virtual Reservation Message (VRM).

ERS/VRM/SMS sent by IRCTC along with any one of the nine prescribed ID proofs in original and the indication of the passenger(s)' name(s) in the Reservation Chart will authorize the passenger to travel

VRM/ SMS sent by IRCTC combined with valid photo-id in original will be treated as an instrument on par with the ERS.

ERS/VRM/SMS sent by IRCTC along with one of the nine prescribed proofs of identity in original will also authorize the passenger to enter the platform on the day of journey and he/she will not be required to purchase platform ticket. ERS/VRM/SMS sent by IRCTC along with original id proof will be required to be produced on demand of Ticket Checking Staff on the platform.

Reference :
1) Railway Board Letter No.2008/TG-I/10/P/SMS dated 20.07.2011

2) Railway Board Letter No.2008/TG-I/10/P/SMS dated 01.02.2012


Life Exclusive
Gay marriage: President Obama’s bold move

The president’s endorsement of gay marriage was a leap of faith but also had an eye on opinion polls. It actually may be Obama’s insurance policy if the economy tanks

It looked as if it was well choreographed. First President Obama’s education secretary Arne Duncan said that he supported gay marriage. Then Vice-President Joe Biden said in a “Meet the Press” programme that he was absolutely comfortable with gay marriage. And then the president stepped in and endorsed gay marriage. In a hastily called interview he told ABC’s Robin Roberts said that at a certain point, “I have just concluded that for me personally, it is important for me to go ahead and affirm that I think same-sex couples should be able to get married”. He said that he had come to this decision after speaking with his wife Michelle and his daughters Malia and Sasha, some of whose friends’ parents were gay, and that his views on gay marriage had finally evolved and he was endorsing it.

Democratic officials later commenting on the decision called it a matter of conscience and not a political calculation while Republican officials called it a distraction. It seems that the president had originally planned to announce it sometime before the Democratic Convention later in the year but the Vice-President’s comment and endorsement of views had forced him to endorse it earlier.

It was immediately evident that America had come a very long way since President Bill Clinton’s “Don’t Ask, Don’t tell” policy for gays in the military which effectively allowed gay soldiers to work in the military without harassment. The policy ensured that soldiers would not be asked to reveal their sexual orientation by the military and hence would be able to maintain their privacy. But they could not be openly gay. President Obama himself had been sitting on the fence about his support or opposition for gay marriage though the “Don’t Ask, Don’t tell” policy had been repealed as being too restrictive.

America has also been moving in favour of gay marriage with now a simple majority favouring gay marriage, a number which is increasing with each passing year. The momentum seems to be only gathering steam and what used to be a plurality has now become a majority. A participant summed it up beautifully on the State of the Union Programme on CNN—she said that the fact of the matter was that her parents knew no openly gay people or had no gay friends but she has several. It seems that once you know someone who is gay your view on gay relationships and gay marriage change even if the people you ‘know’ are only characters on TV soaps.

Immediately this announcement roiled the election campaign. Mitt Romney had tried to pre-empt Obama’s announcement by reiterating as stand that marriage was a union between a man and a woman. At Liberty University, an important Christian college, he reiterated his stand. Mitt Romney is not only against gay marriage but is also against civil unions between gay people something supported by President George Bush.

The president’s announcement was a leap of faith but also had an eye on opinion polls. Recent opinion polls indicated that a majority supported gay marriage. Recent opinion polls also indicated that a majority of independent voters supported gay marriage—but no one quite knows how the announcement would play out. He seemed to have gained a boost in fund raising with gay couples stopping off on the highway to send money by the Internet and at least in the liberal press the coverage was mostly positive. They positioned it as a civil rights issue—perhaps the most important one since the Civil Rights Act. It was framed as an issue; as an issue of constitutionality Vs issue of Christianity. But they were jumping the gun a little. Congress leaders are no closer to repealing the Defence of Marriage Act which defined marriage as the union between a man and a woman and it was unlikely to happen anytime soon. In a mostly Christian nation theirs was as pushback. Some said this marriage in the Garden of Eden was between Adam and Eve and not Adam and Steve. Some called for a constitutional amendment defining marriage as a union between men and women.

The airwaves across the world burst into frenzied opinionating . Some said that any couple in love should be allowed to make permanent their relationship whatever their sexual orientation. There were couples from Nigeria and India which supported gay marriage (the Indian couple said they were engaged and hoped to get married in 18 months. The floodgates seemed to have opened and everyone tried to get a word in.

But Obama’s getting off the fence clearly has some risks. A lot of black churches who support the president are opposed to gay marriage. Also it is less than certain how swing voter states like in North Carolina (which passed an amendment defining marriage); Ohio, a key swing state; and Virginia will vote but Obama has clearly added another arrow to his election campaign apart from the economy. It actually may be Obama’s insurance policy if the economy tanks.

(Harsh Desai has done his BA in Political Science from St Xavier's College & Elphinstone College, Bombay and has done his Master's in Law from Columbia University in the city of New York. He is a practicing advocate at the Bombay High Court.)


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