By Ruma Dubey

The countdown has begun to the Q3FY13 numbers. And this time around, like in Q2, it is not Infosys, but Indusind Bank which will kick off the results for the third quarter in the big ticket category, scheduled to announce its numbers on 9th Jan’12. Infosys will declare its numbers on 11th Jan and like in Q2, Nov IIP data is also on the same day, making it an action-packed day for the markets!

Q2 numbers were muted and disappointing. The perception was that Q2 would be scrapping the bottom and from then on things were only going to look up. This was based on expectations that interest rates would come down and Q3 would look much better. But interest rates were held at the same high levels as in Q1 and Q2 and through Q3 thus not changing the scenario too much. And this time around, macro data and Infosys numbers, both will be in focus. Q2 numbers of Infosys were disappointing in terms of its guidance. And Q3, traditionally is always a lean period due to the holiday season in USA, UK and Europe. Thus even in Q3, one can expect the tier-I IT companies to report a much muted set of numbers, barring TCS, which could continue to show better margins. HCL Tech is also expected to show better Q3 numbers due to stronger order book and signing more deals.

It is expected that Q3 will more or less be like Q2, disappointing to a large extent but the good news is that, maybe this could be the bottom which India Inc could scrape. If one looks at the macro factors to get an insight into Q3, it is apparent that things do not look great. Oct IIP was a blip due to the festive season demand but coming months could show us the true picture. Inflation remains a concern but prices have surely come down from the peak levels and they are currently showing signs of some cooling.

On the other hand, performance from sectors like pharma, FMCGs and hospitals are expected to remain good. Aviation companies, thanks to the ongoing trouble at KFA could once again post very good numbers. Oil and gas growth could remain muted.  Even the financial sectors, especially NBFCs could surprise us with good numbers.  Private sector banks are expected to do well while PSU banks will be a mixed bag. Capital goods sector could continue to remain weighed down by interest burden and realty companies could spring a few surprises, with Sobha Developers already having shown good numbers for Q2.  Tea prices were up during Q3 and hence companies like HUL and Tata Global which procure tea from open markets could see a spike up in their raw material costs. For soap makers like Marico, Godrej Consumers and HUL, copra and palm oil prices have been down thus they could show a lower input cost.

Crisil believes, like it had said for Q2, that the worst is over for India Inc and based on an analysis of the aggregate financials of 280 large companies across 28 key sectors, it expects EBITDA margins to improve by 10 to 30 bps (YoY) in current Q3 and revenue growth of 11 to13%. It has stated in its report that volume growth is estimated to remain muted in Q3 , expecting 17 out of 28 key sectors (excluding banks and oil & gas companies) to witness negative or low single digit growth due to continued macro-economic pressure. It says further in its report that lower demand would be seen  in two-wheelers, retail, textiles, housing and hotels. It expects capital goods, steel and cement sectors to show some volume pressure due execution delays mainly in the power, construction and infrastructure sectors.

Despite all these not-so-good expectations for Q3, one should probably look ahead, beyond Q3 and expect things to only get better. The overall sentiments have improved and some reforms have got the go-ahead and if RBI ushers in a rate cut in Q4, then it will be only one way ahead – up and up. Yes, Q3 might be the last set of depressing numbers which India Inc could witness.