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GST Impact: Discounts All Set To Hit India Inc June Quarter Earnings

The June quarter earnings season is unlikely to be exciting with earnings for several companies hurt post the roll out of the goods and services tax (GST) on July 1.

In particular, key sectors such as FMCG, automobiles and pharmaceuticals were adversely impacted, especially in June, as they de-stocked and offloaded inventory at discounts. “We expect the net income of the BSE-30 Index to be flat year-on-year,” analysts at Kotak Institutional Equites wrote. If that isn’t bad enough, they expect the net income for their universe of stocks to fall 8% year-on-year.

Analysts at ratings agency pointed out revenue growth would be limited for consumption-driven sectors such as automobiles, airlines, FMCG and retail, though there could be some improvement after consecutive quarters of tepid growth post-dem onetisation.

The telecom sector is expected to fare poorly with revenues falling by about 10-15% owing to the tariff war following the entry of Reliance Jio.

Downstream energy companies are not expected to do too well since refining margins could be lower. Moreover, they could suffer adventitious losses due to the recent correction in crude oil prices.

While private sector banks could report fairly good numbers, loan growth for the banking sector is expected to be muted. However, with deposit costs remaining low, or even falling, margins should be stable. Credit costs could remain high, analysts believe.

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