Retail inflation spiked to 7.41% for September 2022, marking an inflation spike of 70 bps in 2 months even amidst a hawkish scenario wherein the RBI has hiked rates by 190 basis points. This is nearly 11 bps more than the consensus estimate of Bloomberg. Food inflation played spoilsport, largely led by a spike in the prices of vegetables and cereals. Now the RBI has to submit a report to the government as to why it had failed to contain inflation. RBI is poised to hike rates by 60 to 70 basis points in the next 2 MPC meetings.
If inflation disappointed on the upside, IIP growth disappointed on the downside, contracting at -0.8% in August 2022. This is the first IIP contraction after 19 months. While mining and manufacturing contracted in August, Electricity showed positive growth. In user-based IIP, pressure came from consumer durables and non-durables. Even the high frequency IIP compared to the previous month remained negative. The one change it could bring about is to force the RBI to focus more on reviving growth than just on inflation.
Union Cabinet approved one-time grant of Rs22,000 crore for the 3 PSU oil marketing companies (OMCs) viz. IOCL, BPCL and HPCL. This is to help them tide over the continuing losses in supply domestic LPG at losses. In the lats 1 year, global prices of LPG had gone up 300%, but the government had tempered the rise in LPG prices, being a sensitive issue. In addition, the 3 OMCs also incurred huge losses on petrol and diesel as selling price failed to cover costs. In the June quarter, the combined losses were Rs18,480 crore.
Byju’s is preparing to lay off 2,500 employees, representing 5% of its total staff. The move comes amidst a tight funding scenario and mounting losses. The job cuts would happen across product, content, media, and technology teams; albeit in a phased manner. This is in addition to the 600 persons it laid off at its group companies (Whitehat Jr and Toppr). Byju’s hopes to drive cost efficiency. Its marketing spending will also be aligned more towards creating a global footprint. In FY21, net losses stood at Rs4,588 crore.
Wipro saw a 9.2% fall in net profit at Rs2,659 crore for Q2FY23 even as the revenue guidance for third quarter was lowered from 3-5% range to 0.2-2% range. For Q2Fy23, total revenues were up 14.6% at Rs22,540 crore. Sequential revenue growth in constant currency terms stood at 4.1%. However, the deal pipeline stays robust with 11 large deals signed having total contract value (TCV) of $725 million. OPM for the quarter stood at 15.1%, even as attrition tapered marginally to 23%. Freshers accretion was up 14%.
HCL Technologies reported 7.09% growth in net profits at Rs3,489 crore for Q2FY23. It raised its full year revenue guidance to the range of 13.5-14.5% in constant currency terms. Revenues were up 19.5% for the quarter at Rs24,686 crore. Growth thrust came from strong demand for cloud,engineering and digital services. EBIT margins contracted by 100 bps to 18% for Q2FY23, while attrition was elevated at 23.8% in Q2FY23. Interestingly, HCL Tech has also come out openly against the practice of employee moonlighting.
For Q2FY23 quarter, Indian companies overall are expected to report 3% fall in net profits, marking the fourth straight quarter of falling profitability. This is largely on the back of rising commodity prices. Clearly, rising revenue momentum is not translating into profits, since revenues are expected to grow at 17% yoy. However, revenues are expected to fall 3% on a sequential basis. Much of the revenue thrust is likely to come from consumer discretionary and IT services. More than two-thirds of sectors will see OPM shrink.
Central government scrapped plans to privatize the Bhadravathi steel plant (part of SAIL) in the absence of bidder interest. It had invited EOIs to divest 100% in the plant in mid-2019. Central government owns 65% stake in SAIL, which is worth Rs29,600 crore at CMP. For Q1FY23, SAIL had reported 80% fall in net profits on a standalone basis to Rs776 crore amidst rising input costs and lower realizations. EBIT for the quarter had fallen by 60.95% due to the cost spike, even as revenue growth was robust at 16% in Q2FY23.