India Inc earnings disappoint, analysts warn of bleak holiday season

BENGALURU: India Inc has given its most disappointing quarterly figures in at least three years and analysts warn that hopes that the holiday season will be thwarted by an economic slowdown.

More than 60% of the 125 companies that have reported so far, and which are analyzed by analysts, lost earnings forecasts for the June quarter, the most since at least 2016, according to Refinitiv data.

The leading lenders and automakers in India have sounded the warning bells about slower growth in demand and consumption.

It will be a gloomy Diwali. Things are not going to change immediately in the next two or three months, said Umesh Mehta, head of research at Samco Securities.

The holiday season, which begins in September and runs until the end of the year, is the biggest sales season for companies. It usually peaks around Diwali, or the festival of lights, in October.

But this time, the outlook for the period is moderate after the Indian economy grew at the slowest pace in more than four years in the January-March quarter. An erratic monsoon, high unemployment rates and a liquidity crisis in the shadow banking sector have increased uncertainty.

Consumers currently postpone their purchases due to the general slowdown, said Neeraj Dewan, director of Quantum Securities.

Consumer goods giant Hindustan Unilever warned that demand will continue to be moderate given macroeconomic conditions.

The Nifty benchmark has fallen more than 10% since reaching a record high in early June and is the fourth worst performance among its main Asian peers so far this year.

The growth engine is slowing down, so we are seeing a settlement, said Mehta de Samco.

Car manufacturers have been among those most affected by falling demand, with monthly car sales in India that fell 17-20% since April. Preliminary data shows that total car sales in the country may have fallen by up to 30% in July.

Tata Motors, India's leading automaker by revenue, posted a greater than expected loss for the June quarter. The rival Maruti Suzuki, who managed to overcome the estimates helped by cost cuts, saw an 18% drop in sales.

Gopal Mahadevan, chief of finance for truck manufacturer Ashok Leyland, said lower car sales have more to do with the general economic condition and not a demand problem.

Among the few bright spots for the quarter were Johnny Walker and Smirnoff maker Diageo, which reported an 8% increase in sales in India, led by a strong demand for Scotch whiskey. Its subsidiary, United Spirits, registered a near 10% increase in sales.

The effect of lipstick, which indicates that consumers spend more on low-priced luxury items and instant gratification during a crisis, could be at stake here, said Gnanasundaram Saminathan, research analyst at Spark Capital Advisors.