Earnings season: India Inc stressed over poor demand, high raw material costs

It’s been a season of many misses and very few hits. Weak demand and keen competition have left companies with limited pricing power while higher raw material prices have driven up costs. It’s not just smaller businesses that are finding it hard to pass on the higher costs, which are both commodity-driven and regulation driven. Heavyweights too have not been able protect their margins; from BHEL to HeroMotoCorp and Bharti Airtel, it has been a string of disappointments.

The stress can be seen in the balance sheets. An analysis of 1,803 companies (excluding banks and finance companies), by CARE Ratings, showed the interest cover — or the ratio of PBDIT to interest — had slipped to six times in Q3FY19 from 6.6 times in Q3FY18.

The pain has been particularly severe in sectors such as telecom. While Vodafone Idea reported a massive consolidated net loss of Rs 5,005 crore, Bharti Airtel just about managed to stay in the black with a small profit of Rs 86 crore, on the back of an exceptional gain of Rs 1,017 crore. Rivals Bajaj Auto and Hero MotoCorp have been compelled to get into a price war to protect