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MOSL: VOICES | INDIA INC ON CALL- Reverberation of caution in tepid but in-line quarter

VOICES | India Inc on Call: Reverberation of caution in tepid but in-line quarter

 

In this report, we present detailed takeaways from the 2QFY20 conference calls as we refine the essence of India Inc ‘Voices’.

• The 2QFY20 corporate earnings-report was in line with our expectations for both the Nifty and the MOFSL Universe. EBITDA/PBT came in line, while PAT exceeded our estimate driven by the corporate tax cut. Financials drove 90% of incremental earnings. The Nifty delivered 8% earnings growth for the quarter versus our estimate of an 8% decline, even as PBT was down by 3%. For FY20, our Nifty EPS estimate remains stable at INR538, and we now expect 12% profit growth for the Nifty, singularly led by Financials. Auto and Utilities were the only sectors exceeding our PBT estimate in the quarter. Corporate commentaries remain cautious around both consumption demand and investment revival.  
• In BFSI, Banks reported a slowdown in corporate loan growth amidst the weak economic environment. Commentaries broadly reflected caution toward wholesale lending, but comfort on retail loan growth. The PCR trend has improved with banks continuing to make healthy provisions in an attempt to further strengthen balance sheets. However, credit cost is expected to stay elevated due to banks' exposure to newly surfaced stressed names. NBFC commentaries indicated caution too. Vehicle financiers are expecting slowdown in loan growth, especially in the HCV segment. Flooding has impacted demand for players in certain geographies. BAF is cautious on some segments like digital product financing, SMEs and B2C.
• Consumer companies across the board appeared cynical from the near-term perspective, given the rural scenario. Demand slowdown was led by subdued consumer sentiment, liquidity crunch in channels, and disruptions in supply chain due to floods. Management commentary also did not indicate any material pick-up in demand in 3QFY20.