The second quarter of the financial year 2023-24 has been a mixed bag for the Indian corporate sector, with some companies reporting strong earnings growth and others facing challenges due to the pandemic, supply chain disruptions, inflation, and regulatory issues. The Q2 results of some of the prominent companies have had a significant impact on their share prices, for some in a positive way and for some in a negative way.
Additional Read: Q2 Results Dashboard
Positive Impact
One of the sectors that performed well in Q2 was the IT sector, which benefited from the increased demand for digital transformation, cloud migration, and cybersecurity solutions from global clients. Two of the leading IT companies, Infosys and HCL Tech, reported better-than-expected results and raised their revenue guidance for the full year.
- Infosys posted a 20.5% year-on-year (YoY) growth in consolidated net profit to ₹6,212 crore and a 17.5% YoY growth in revenue to ₹38,994 crore in Q21.
- HCL Tech reported a 10.5% YoY growth in net profit to ₹3,832 crore and a 16.9% YoY growth in revenue to ₹26,672 crore in Q2.
Both the companies also announced interim dividends and share buybacks, which boosted their share prices.
Another sector that witnessed growth in Q2 was the FMCG sector, which witnessed a recovery in demand from both urban and rural markets. One of the leading FMCG companies, ITC, reported a 10% YoY growth in standalone net profit to ₹4,927 crore and an 11.7% YoY growth in revenue to ₹12,624 crore in Q2. The company’s cigarette business, which accounts for about 40% of its revenue, grew by 13.8% YoY to ₹5,540 crore in Q2, despite the challenges posed by the second wave of Covid-19 and higher taxes. The company’s non-cigarette FMCG business also grew by 11.8% YoY to ₹3,797 crore in Q2, driven by strong performance in packaged foods, personal care, and education segments. ITC shares gained about 3% on October 14, 2023, after it announced its Q2 results.
Negative Impact
One of the sectors that faced headwinds in Q2 was the metals sector, which suffered from high input costs, lower production volumes, and lower realisations due to the global slowdown and China’s curbs on steel output. One of the major steel producers, Tata Steel Long Products (TSLP), reported a net loss of ₹136 crore in Q2 as compared to a net profit of ₹234 crore in Q1. The company’s revenue declined by 9% quarter-on-quarter (QoQ) to ₹1,734 crore and its EBITDA margin contracted by 1,100 basis points QoQ to 5.3% in Q2. The company attributed its poor performance to lower sales volumes due to planned maintenance shutdowns and lower realisations due to weak market conditions. TSLP shares fell by 7.7% on October 13, 2023, after it declared its Q2 results.
Another sector that disappointed in Q2 was the telecom sector, which faced intense competition, regulatory uncertainties, and high debt levels.
Den Networks (Den), reported a flat net profit of ₹47 crore and a 3.4% YoY decline in revenue to ₹277 crore in Q2. The company’s EBITDA margin improved by 140 basis points YoY to 5% in Q2 due to cost optimization measures. However, the company’s subscriber base declined by 4.6% YoY to 6.9 million and its average revenue per user (ARPU) declined by 1.9% YoY to ₹121 in Q2. Den shares dropped by 9.8% on October 13, 2023, after it announced its Q2 results.
Conclusion
The impact of the Q2 results on the share prices of the companies has been largely driven by their earnings growth, margin expansion, guidance, dividends, and buybacks. The market has rewarded the companies that have delivered strong results and punished the ones that have missed the expectations. The Q2 results have also provided insights into the emerging trends and challenges in the post-pandemic scenario and the outlook for the future.
