GST impact: India Inc profits fell 11% in Q1, says Morgan Stanley report

Live mint By PTI Fri, Aug 18 2017. 07 01 PM IST

The goods and services tax (GST) regime has made a dent on India companies’ earnings for first quarter, says a Morgan Stanley report

GST, which was executed on 1 July, adversely affected net profits growth for the first quarter of the current fiscal, said report. Photo: Hemant Mishra/Mint

Mumbai: The impending goods and services tax (GST) regime has made a dent on India Inc’ earnings for the April-June period, with profit growth falling to a five quarter low of 11%, says a Morgan Stanley report.

According to the global brokerage firm, GST, which was executed on 1 July, adversely affected net profits growth for the first quarter of the current fiscal, with companies in the materials, consumer discretionary sharing bulk of the burden. “Companies in the materials, consumer discretionary and consumer staple sectors reported impact (from GST execution),” the report said.

“Most of the impact was caused by channel destocking and dealer incentivisation which probably explains why both revenue growth and particular margin performance was weak in the quarter for these sectors,” it added. Financials, utilities, technology and telecom sector companies did not report impact of GST on their earnings either in their earnings release or the management commentary.

However, corporates’ revenues saw strong growth at 10%, the highest in last 12 quarters, for April-June period of 2017, compared to same period year-ago. “Broad market (1020 companies) revenue growth accelerated to 10% year-on-year even as the net profit fell 11% year-on-year,” the report said.

At the sector level, commodity linked sectors (energy, materials and utilities) and industrials reported the strongest revenue growth, while telecom, consumer discretionary saw the most decline in net profits. For an even broader sample of 2,629 companies, revenue rose 9% and net profit growth fell 11% year-on-year, it said.

Further, Sensex companies saw revenue growth of 5 per cent and fall in net profit growth of 6%, for the period under review.

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