Q4FY23 Earnings Report : What Investors Need To Know

India’s corporate earnings season is in full swing and the results are in. Overall, the results were in line with street expectations with some sectors performing well while others struggled. Bhavya Rathod highlights the winners and losers and provides an insight into how the winds are blowing for India Inc. in the current scenario 

The Indian equity market continues its winning streak even in the month of May after a weak run over the last four months of FY23. Since April 2023, India has outperformed the global equity market. In the month of April, the frontline equity index alone gained as much as 4.1 per cent. 

One of the reasons for such outperformance is definitely the huge underperformance of the Indian equity market in the last few months. However, the results announced by India Inc. for the quarter ended March 2023 has also played its role besides the Reserve Bank of India’s decision to stop consecutive rate hikes. All this led to realty, PSU banks and automotive and Small-Cap companies post remarkable gains in their share prices since the start of April. [EasyDNNnews:PaidContentStart]
 

March Results at a Glance

India’s corporate earnings season is in full swing and the results are in. Overall, the results were in line with street expectations with some sectors performing well while others struggled. Out of little more than 4,000 odd companies listed with the BSE, 80 per cent of the companies as on May 14 are yet to announce their results for the quarter ending March 2023. Nevertheless, when we account for market capitalisation for companies that have announced their results, it constitutes almost 40 per cent of the total market capitalisation of the Indian equity market and 75 per cent of Nifty 50. 

On an aggregate basis the earnings of the companies announced for quarter ending March 2023 have been in line with analysts’ estimates. For the 760 companies that we analysed, the revenue has risen by 11.2 per cent on a yearly basis. The hotel industry has posted one of the best growths in revenue among all the other sectors. Seven companies from this industry that came out with their results have witnessed growth of around 71 per cent. In terms of sectors having higher weightage in indices, the aggregate performance has been led by banks and commercial vehicles that reported 32 per cent and 34 per cent earnings growth, respectively. 

What dragged the performance was weaker-than-expected performance of metals largely led by aluminium and iron and steel companies. They reported weaker-than-expected results due to lower commodity prices. In terms of net profit, these 760 companies saw profit growth of 18.66 per cent on a yearly basis. Financial services’ companies excluding banks have shown the best profit growth on a yearly basis. For instance, Religare Enterprises saw a turnaround and posted profit in Q4FY23 compared to loss in the same quarter last year. 

Overall, the latest earnings season has provided a mixed bag of results for India’s listed companies. While some sectors have thrived, others have struggled to keep up. In the next section, we will highlight some of the top-performing companies and those that have disappointed investors, providing insights into what’s driving their success or failure. Now get ready to crunch some numbers! We are diving deep into the March quarter earnings season to explore the financial results of companies that have already made their mark.
 

Information Technology

The IT sector in India was negatively impacted following the banking crisis in the US and Europe, which was triggered by the collapse of Silicon Valley Bank and Signature Bank in the US, as well as the turmoil at Swiss lender Credit Suisse. The information technology services companies in India have been struggling due to the heightened fears of recession in developed markets and the repercussions of the banking crisis. The situation is not expected to improve until the end of the year. Furthermore, foreign portfolio investors (FPIs) have sold their stakes in IT companies due to the ongoing weakness in the sector. In March, FPIs became bearish on the IT and oil and gas sector and sold equities worth ₹ 13,734 crore between these two sectors. 

Tata Consultancy Services (TCS), India’s largest IT services company, recorded a profit of ₹ 11,392 crore in Q4FY23, reflecting a YoY increase of 14.8 per cent from ₹ 9,926 crore in Q4FY22. There was a sequential increase in profit by 4.67 per cent. TCS’ revenue increased YoY by 16.94 per cent to ₹ 59,162 crore, with a sequential increase of 1.6 per cent. The company’s fiscal year was boosted by robust growth in North America, the UK and India, along with a strong order book TCV of USD 34.1 billion and a record high number of large deals. 

However, TCS’ outgoing CEO Rajesh Gopinathan noted in a post-earnings conference that the company is experiencing strain in its major market of North America and the anticipated recovery has not yet materialised. K Krithivasan is set to take over as CEO and MD on June 1, 2023. Infosys, a major IT company, reported a weak quarter sequentially. The company’s Q4 net profit after tax (PAT) decreased by nearly 16 per cent QoQ to ₹ 6,128 crore while the revenue also declined by 2.2 per cent QoQ to ₹ 37,441 crore. In constant currency, however, the company’s revenue growth came in at 3.2 per cent QoQ and 8.8 per cent YoY and the operating margin stood at 21 per cent in Q4. 

Infosys also declared a final dividend of ₹ 17 per share for FY23. However, the reported numbers were well below their FY23 guidance with the worst decline in a decade in constant currency growth. As a result, the margins have declined and the company guided for a 4-7 per cent revenue growth in FY24. This is the first time since FY16 that Infosys has guided for single-digit revenue growth in constant currency terms. HCL Technologies has announced its financial results for the quarter ended March, revealing a consolidated net profit of ₹ 3,983 crore. 

This represents an increase of 11 per cent compared to the same period last year when the net profit was ₹ 3,593 crore. However, the net profit declined 3 per cent sequentially from ₹ 4,096 crore in the previous quarter. The revenue from operations rose by 18 per cent to ₹ 26,606 crore in the fourth quarter compared to ₹ 22,597 crore in the same period last year. Service revenue increased by 11 per cent YoY in CC terms while its software business revenue grew by 8.2 per cent and digital revenue increased by 17 per cent. 

HCL Technologies also won 13 large deals during the quarter, with a total contract value (TCS) of USD 2.07 billion, which represents an 8 per cent YoY decline. Wipro, the IT major, reported a consolidated net profit of ₹ 3,074 crore in Q4FY23, which is a marginal decline of 0.4 per cent YoY. The revenue from operations, on the other hand, rose by 11 per cent YoY to ₹ 23,190 crore. The company’s board of directors has given its approval for a share buyback at ₹ 445 per share, which will not exceed ₹ 12,000 crore. The IT services’ segment revenue rose by 4 per cent YoY to USD 2,823 million during the quarter ending March 2023, and it saw a marginal increase of 0.7 per cent sequentially.
 

Banking

HDFC Bank’s consolidated net profit for the quarter ended March 31 rose by 21 per cent YoY to ₹ 12,594.5 crore while consolidated net revenue grew by 20.3 per cent YoY to ₹ 34,552.8 crore. Net profit increased by 19.8 per cent YoY to ₹ 12,047.5 crore. The bank’s net interest income grew by 23.7 per cent to ₹ 23,351 crore with total deposits at ₹ 1,883,395 crore, up nearly 21 per cent from March 31, 2022. Total advances as of March 31, 2023 were at ₹ 1,600,586 crore, an increase of 16.9 per cent YoY. The bank’s gross non-performing assets declined to 1.12 per cent of gross advances compared to 1.23 per cent on December 31, 2022 and 1.17 per cent on March 31, 2022. 

Net non-performing assets stood at 0.27 per cent of the net advances as on March 31, 2023. HDFC Bank’s total capital adequacy ratio as per Basel III guidelines was at 19.3 per cent, while provisions and contingencies for the quarter ended March 31, 2023, stood at ₹ 2,685.4 crore. The bank’s board of directors recommended a dividend of ₹ 19 per share for the year ended March 31, 2023, up from ₹ 15.5 in the previous year. For the quarter ended March 2023, ICICI Bank, India’s secondlargest private bank, saw a 30 per cent YoY increase in net profit, reaching ₹ 9,121.9 crore. 

Net interest income (NII) also increased, rising 40.2 per cent to ₹ 17,667 crore, with healthy growth in the bank’s domestic loan book. Business banking loans grew by 34.9 per cent YoY, followed by 21 per cent growth in loans to corporates and the retail loan portfolio grew by 22.7 per cent YoY. The bank’s provisions surged 51.5 per cent YoY to ₹ 1,619 crore with a contingency provision of ₹ 1,600 crore. During January to March, the bank’s deposit growth rate was 10.9 per cent, slower than credit growth. ICICI Bank’s gross bad loans declined to 2.81 per cent from 3.60 per cent a year ago and the net nonperforming assets declined by 25.9 per cent YoY to ₹ 5,155 crore for the quarter ended March 31, 2023, with a net NPA ratio of 0.48 per cent. 

The bank’s net interest margin (NIM) also increased to 4.90 per cent in Q4 2023 from 4 per cent in Q4 2022 and 4.65 per cent in Q3 2023. For the March quarter, Kotak Mahindra Bank announced a standalone net profit of ₹ 3,495 crore, a 26 per cent increase from the previous year’s figure of ₹ 2,767 crore. The bank’s net interest income (NII) for Q4FY23 rose 35 per cent to ₹ 6,103 crore from ₹ 4,521 crore in Q4FY22. According to a press release, the bank’s net interest margin (NIM) was 5.75 per cent for Q4FY23 and 5.33 per cent for the full year. The bank gained 2.2 million customers in the March quarter. 

The bank’s total number of customers has reached 41.2 million as of March 31, 2023, up from 32.7 million the previous year. Its asset quality improved with the gross non-performing assets (GNPA) ratio at 1.78 per cent and the net non-performing assets (NNPA) ratio at 0.37 per cent as of end March 2023. In comparison, GNPA was 1.90 per cent and NNPA was 0.43 per cent in the December 2022 quarter. The bank provisioned ₹ 147.6 crore for the quarter compared to ₹ 148.7 crore for the previous quarter. Kotak Mahindra Bank also announced a dividend of ₹ 1.50 per equity share with a face value of ₹ 5 for FY23.

Sensex Constituents

Reliance Industries Limited’s net profit for the March quarter increased 19 per cent from the previous year to ₹ 19,299 crore. The revenue from operations rose 2.8 per cent YoY to ₹ 2.13 lakh crore. The company’s bottom-line was boosted by a 19 per cent increase in other income to ₹ 2,918 crore. The digital services segment saw an increase in margins while the retail business experienced favourable mix, operating efficiencies and higher transportation fuel cracks. The oil and gas segment saw better gas price realisation and higher volumes. The oil-to-chemicals business, on the other hand, recorded revenue of ₹ 1.29 lakh crore, which was down nearly 12 per cent YoY due to a sharp reduction in crude oil prices and lower price realisation of downstream products. 

Jio Platforms and the retail business of Reliance Industries had a strong quarter with Jio Platforms registering a record consolidated quarterly revenue of ₹ 29,871 crore, up 14.3 per cent YoY and Reliance Retail Ventures recording a consolidated revenue increase of more than 19 per cent YoY to a record ₹ 69,267 crore, with an operating profit surge of 33 per cent YoY to a record ₹ 4,914 crore. Bajaj Finance announced that its consolidated net profit for the quarter ended March 2023 surged by 30.51 per cent to ₹ 3,157.79 crore from ₹ 2,419.51 crore in the corresponding quarter last year. The financial services’ firm’s revenue from operations increased 31.68 per cent to ₹ 11,359.59 crore from ₹ 8,626.06 crore in the year-ago quarter. 

Its net interest income in Q4FY23 rose by 28 per cent to ₹ 7,771 crore, up from ₹ 6,061 crore. The gross NPA and net NPA as of March 31, 2023 stood at 0.94 per cent and 0.34 per cent, respectively, compared to 1.60 per cent and 0.68 per cent as of March 31, 2022. As of March 31, 2023, the company had a provisioning coverage ratio of 64 per cent on Stage 3 assets and 118 basis points on Stage 1 and Stage 2 assets. The firm booked 7.56 million new loans during the quarter, up 20 per cent from 6.28 million loans last year. Assets under management (AUM) grew by 29 per cent to ₹ 247,379 crore as of March 31, 2023 from the core AUM of ₹ 192,087 crore as of March 31, 2022 with the highest-ever AUM growth in Q4 at ₹ 16,537 crore. 

Hindustan Unilever Limited (HUL) announced standalone net profit of ₹ 2,552 crore for the March quarter of FY23, indicating a rise of 9.66 per cent from ₹ 2,327 crore in the corresponding quarter of the previous fiscal year. The total revenue for the quarter amounted to ₹ 15,053 crore, marking a 10.81 per cent increase from ₹ 13,584 crore in the year-ago quarter. Although the profit was mostly in line with expectations, revenue was lower than expected. The underlying volume growth during Q4 was 4 per cent, which was lower than the anticipated growth. 

HUL stated that its home care division delivered a strong performance with a 19 per cent increase in revenue. The fabric wash and household care segments saw strong double-digit growth. The beauty and personal care division grew by 10 per cent with widespread performance across categories. Maruti Suzuki, India’s biggest carmaker, announced a 43 per cent surge in standalone net profit to ₹ 2,623 crore for the quarter ended March 2023, although it fell short of street estimates of ₹ 2,773 crore. Revenue from operations for the March quarter grew by 20 per cent YoY to ₹ 32,048 crore. The company’s annual turnover exceeded ₹ 1 lakh crore. 

On the operational front, EBITDA (earnings before interest, taxes, depreciation and amortisation) rose by 38 per cent to ₹ 3,350 crore and margins increased by 130 basis points YoY to 10.4 per cent. Maruti Suzuki sold 514,927 vehicles during the quarter, up 5.3 per cent from the same period last year. The company’s board of directors recommended a dividend of ₹ 90 per share, the highest ever. The company also announced that it had received in-principle approval from its directors during the annual earnings’ meeting to increase its annual production capacity by one million vehicles, enabling it to leverage the anticipated growth in domestic and overseas’ markets. 

Ultratech Cement’s consolidated net profit for the March quarter of FY23 was ₹ 1,665.95 crore, showing a decline of 32.29 per cent from ₹ 2,460.51 crore in the same quarter of the previous fiscal. The reason for the decline was the significantly higher tax outgo in this quarter compared to the corresponding quarter in the previous fiscal, when the company had a credit. The company’s revenue from operations increased 18.36 per cent YoY to ₹ 18,662.38 crore, according to a regulatory filing. Ultratech Cement reported that it achieved a production, dispatch and sales volume of 100 million tonnes in FY23, supported by an effective capacity utilisation of 95 per cent during this quarter and 84 per cent utilisation for the year. 

The company witnessed a 17 per cent YoY increase in energy cost and a 4 per cent QoQ decrease. Pet coke and coal prices increased 18 per cent YoY. Raw material costs increased 9 per cent YoY due to the rise in the cost of fly ash, slag, gypsum and other materials. For the quarter ended in March 2023, Titan Company posted a standalone net profit of ₹ 734 crore, representing a growth of 50 per cent from ₹ 491 crore in the corresponding period of the previous year. Revenue from operations rose by 25 per cent to ₹ 8,753 crore from ₹ 6,977 crore in the same period of the previous year. 

The jewellery segment experienced a growth of 24 per cent to ₹ 7,576 crore in the March quarter while the India business witnessed a growth of 21 per cent. The wedding segment witnessed growth rates slightly higher than the overall retail sales. The watch and wearable segment recorded a total income of ₹ 871 crore, an increase of 40 per cent supported by the strong growth in the analog watches’ segment and a significant increase in wearable products. The eye care business witnessed a revenue growth of 25 per cent at ₹ 165 crore. The emerging business revenue stood at ₹ 77 crore, comprising fragrances, fashion accessories and Indian dress wear, with a growth rate of 31 per cent, and Taneria with a 200 per cent growth rate.
 

Rochan Pattnayak, Director, Institutional Research, Choice Broking
 

Automotive — In Q4FY23, OEMs saw improved margins and revenues through lower raw material costs, cost-control measures and price hikes. Eicher Motors, TVS Motors, and Bajaj Auto are expected to deliver positive growth with the growing premium segment and rebounding in the export market. Passenger vehicle OEMs with strong order books are expected to deliver healthy growth in FY24 as well, backed by stable chip supply.
 

Information Technology — The IT industry faces moderating growth amidst macro uncertainty, but a positive outlook persists with a strong deal pipeline in key verticals. Operating margins are expected to improve.
 

Cement — In Q4FY23, cement companies saw volume growth, but realisations remained flat or lower. They are expanding to strengthen their market position. Decreased power and fuel costs lowered the total cost per tonne, boosting EBITDA per tonne.
 

Banking — In Q4FY23, the banking industry met expectations with strong earnings growth driven by healthy NIM, high loan growth, and favourable credit costs.
 

Pharmaceuticals — Q4FY23 earnings fell short of expectations as revenue from US’ generics declined. Margins contracted due to product mix changes and a decline in the higher-margin CDMO business.
 

Dikshit Mittal, Fund Manager and Senior Equity Research Analyst, LIC Mutual Fund Asset Management Ltd.
 

"The Markets Are Expected To Break Out On The Upside"
 

How has the earnings’ season been so far? Additionally, in your opinion, which sectors do you believe are poised for strong performance in the upcoming quarters?
 

On an aggregate basis, the earnings’ season has been in line with market expectations. However, there has been wide divergence across sectors. While sectors like banking, financial services and insurance (BFSI), automotive and industrials have reported good numbers, IT and consumer goods have been subdued. In the upcoming quarters, BFSI and industrials goods may continue to do well. The consumer goods’ sector may also come back strongly as commodity inflation to a large extent has subsided and consumer companies may report recovery in margins going forward.
 

What’s your outlook on the domestic equity markets in the short to medium term?
 

The markets have been in a consolidation phase for the last 18 months and during this phase they have digested lot of negative news such as the Russia-Ukraine war, rising inflation and hike in interest rates. In the near term, as growth is slowing down across globe and interest rates are still high, this consolidation phase may last for some more time. However, market valuations based on Bloomberg consensus are now at a reasonable 18-19 times with one year forward PE, limiting any major downside. Post this consolidation phase the markets are expected to break out on the upside, barring any global unforeseen event.
 

What emerging investment trend do you anticipate will have the greatest impact over the next 10 years?
 

The two key advantages for India – demographics and rising middle-class – are expected to continue to drive the country’s growth for the next decade. With the current median age at just 28 years, the working age population may be a key driver for India to emerge as an attractive manufacturing base. India is also home to the largest middle-class segment in the world. These factors coupled with continued reforms like Production Linked Incentive (PLI) scheme for manufacturing across sectors is expected to create jobs, which in turn may lead to a burgeoning middle-class and drive per capita income growth. This bodes well for sectors like discretionary consumption, manufacturing, exports and financial services for the next decade. 

"The Q4FY23 earnings season has been an indication of normalisation of revenue growth and profit margins which got a lift coming out of the shadows of the pandemic. Of the larger sectors, IT clearly disappointed as growth struggled in the wake of recessionary fears across the world while the management commentaries were cautious for the near term. On the financials’ side, private banks delivered strong profit growth. However, for banks there were signs of net interest margins peaking out, which create a large base, possibly leading to optically subdued profit growth for the next year. The automotive sector so far has delivered very strong profit growth Q4FY23. 

This has been driven by volume growth, higher realisation and margin expansion with commodities’ prices cooling off. Industrials, which have shown strong leadership in the current market phase, have also shown some signs of slowdown. With the market having already anticipated misses on the earnings expectations front, in most of the cases price corrections have already been played out and hence the overall market has held up firmly. Investors should capitalise on the current weak earnings season by identifying strong franchises with long runway which are temporarily reporting disappointing numbers. They should stay away from the weak franchises which had super-normal profits and growth due to the pandemic-triggered supply chain disruptions." 

- Amit Nadekar, Senior Equity Fund Manager, LIC Mutual Fund

Winners and Losers 

Large-Cap stocks that impressed investors and analysts this earnings season include Asian Paints, Shriram Finance, Union Bank, SBI Cards and Payments Services, Pidilite Industries, Mahindra and Mahindra Financial Services, One 97 Communications, Tata Power and ICICI Lombard Insurance. Some large-cap companies that failed to deliver impressive results include Tata Steel, Indus Towers, ACC, Mphasis, Wipro, Coal India, Bank of Baroda, Hindustan Zinc, Ultratech Cement and Bajaj Auto. The Mid-Cap winners this earnings season are Ujjivan Small Finance Bank, Shoppers Stop, KPIT Technologies, Mahanagar Gas, Westlife Foodworld, IDFC First Bank, Persistent Systems, KEC International, Dalmia Bharat, Federal Bank, Cholamandalam Investment and Finance, UCO Bank, Kansai Nerolac Paints, Indiamart Intermesh, Canara Bank, Sona BLW Precision Forgings, Varun Beverages and Apar Industries. 

The mid-cap losers this season include UPL, Petronet LNG, Aarti Industries, Yes Bank, Voltas, Laurus Labs, Piramal Enterprises Ajanta Pharmaceuticals and Exide Industries. 

The small-cap companies that brought a smile to investors’ faces are Mold Tek Packaging, DCB Bank, AGI Greenpac, Cigniti Technologies, VIP Industries, Kalpataru Power Transmission, Ballu Forge Industries, Servotech Power Systems, Vertoz Advertising, Mastek, Jammu and Kashmir Bank, Anand Rathi Wealth, Angel One, Cyient, Wendt India, Bank of Maharashtra and Poonawalla Fincorp. The small-cap companies that disappointed investors are GM Breweries, Network 18 Media and Investments, Quick Heal Technologies, Alok Industries, Sterling and Wilson Renewable Energy, TV18 Broadcast and Orient Cement.
 

Conclusion

Despite the global banking situation, the Indian banking sector remained strong and recorded impressive growth. Meanwhile, the automotive sector’s Q4FY23 profits saw significant growth due to increased volumes, higher realisations and expanded margins as commodity prices cooled off. Although the industrial sector has been a strong leader in the current market phase, it has shown some signs of slowing down. However, since the market has already anticipated earnings’ misses, price corrections have been made and the overall market has remained stable. Overall, the Q4FY23 earnings season has indicated a return to normal revenue growth and profit margins following the pandemic. While there were some bright spots in the Indian corporate earnings’ landscape, it is clear that there are still challenges to be faced. As always, investors will need to carefully analyse the results of individual companies in order to make informed investment decisions.

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