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Despite Corporate Tax Cuts, H1 FY2020 Earnings Are Flat, Says CARE Ratings

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Despite Corporate Tax Cuts, H1 FY2020 Earnings Are Flat, Says CARE Ratings
Himali Patel - 19 November 2019

Mumbai, November 19: As per the first half of the current fiscal year 2020, the corporate earnings have been a weak indicative of an overall slowdown in various industries and economy, as per a recent study done by CARE Ratings.

The study said the earnings have been disappointing in terms of growth in sales and net profit. The study is based on a sample of 2,398 companies analyse from software ACE Equity. The final research shows a decline in growth of half-yearly net sales and operating profits while net profits in H1-FY20 have contracted, despite a number of companies availing the benefit of the optional corporate tax.

Further, a number of corporates that availed the corporate tax cut benefit has been reflected in the computed sample set for the study. “Size wise analysis shows that the large corporates (having net sales of Rs 10,000 crore) have accounted for a significant amount of the contraction in both top-line and bottom line at the aggregate level. Also, the net sales of small companies (below Rs 100 crore) have registered significant contraction during H1-FY20,” said Madan Sabnavis, Chief Economist, CARE Ratings.

That said, for the first half of the net sales growth has been virtually flat, growing at a rate of 0.4 per cent as compared to the growth of 17.3 per cent during the same period, a year ago. Also, a snapshot of quarter two earnings showed a contraction in top-line and net profits of these sample companies. “Half-yearly numbers show moderation in net sales and operating profits but notable negative growth in net profits. This is attributed to a certain set of telecom companies which have recorded losses during the half-year owing to one-time provision in its profit and loss statement. The same was recorded as under “extra-ordinary item” which has led to a steep decline in net profits,” explained Sabnavis.

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