The Hindu Business Line : Recession pains not over for 16 of 65 sectors surveyed

BL Research Bureau Corporate India’ slow march to recovery may have prompted the Finance Minister to hope for an over 7 per cent growth in GDP for FY-10, but for Sesa Goa, Steel Authority of India, Jet Airways, Mastek, Great Eastern Shipping Company and many more recession pains linger.

Sales for these companies are still far below the numbers of last year. For companies in sectors such as airlines, mining and minerals, steel, shipping and mid-tier software, the slowdown is far from over, with September sales being tepid or even lower than the June quarter.

Hit by commodity prices

An analysis of around 3,370 listed companies, classified under 65 sectors, suggests that companies from at least 16 sectors (or one in four sectors) are still struggling to expand their revenues on a standalone basis. These 16 sectors accounted for 20 per cent of the sales of the above-mentioned listed category in the September quarter.

Companies falling in the commodity space, including steel, petrochemicals, paper, fertilisers and pesticides, are predominantly the ones struggling to get back to revenue levels of last year, with sharp decline in commodity prices hurting their realisations. Better volumes have nevertheless ensured single-digit growth (sequentially) for some sectors such as steel.

Airline woes

Another badly hit sector is airlines. The woes of the beleaguered airline companies only multiplied, what with lower passenger traffic forcing a number of players to slash tariffs (until September), thus dragging down revenues further.

Among others, while large software companies managed growth, mid-tier IT companies bore the brunt of the financial crisis, with currency fluctuations too affecting revenues.

Players such as Prithvi Information Solutions and Hexaware have just begun to show sequential growth, though their revenues remain well below last year. The going has been tough for IT hardware companies such as CMC and HCL Infosystems with the slowdown forcing a cutback on or withholding of IT spending from corporates.

Decline in world trade

Similarly, companies from the shipping and trading sectors are yet to recover from the blow dealt to international trade last year. Shipping companies such as Great Eastern Shipping, Essar Shipping and Shipping Corporation of India have been hit by the decline in the export-import activity and the drop in ships chartered.

Note that India’s export value has been declining over the last 12 months and witnessed a 13.8 per cent decline in September 2009 over a year ago. Imports too have been on a downtrend since December 2008.

However, not all export-reliant sectors are downt. Diamond/jewellery sector put up a 37 per cent growth in September year-on-year. Companies such as Rajesh Exports, Gitanjali Gems showed no lingering effects of the slowdown.

The textile space, too, put up a reasonable show of 11 per cent growth in the latest quarter. That textile machinery suffered, however, suggests that the textile players did curtail capex spending.

Overall, many of the above sectors have been showing tentative signs of recovery — improving upon their previous quarter’s revenues albeit struggling to expand over their year-on-year numbers.

For mid-tier IT players or the paper industry, the September quarter may just be a step forward to growth after three earlier quarters (December 2008 to June 2009) of sequential decline.

For others such as shipping and mining/minerals the decline in revenue continues.

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