+
How companies managed to boost profitability post-lockdown
ECONOMY & POLICY

How companies managed to boost profitability post-lockdown

Will profits growth of over 30% in Q2 sustain?
Large companies are cornering bigger market shares. Their turnovers are rising at the cost of other declining turnovers of smaller and medium-sized firms. Consolidation is likely as either the companies will sell out or clients will agree to pay a higher price and reach out to the bigger brand and more trusted company in virtually every sector.

The economy has shrunk by 7.5% in the second quarter against a 23.9% contraction in the first quarter, signalling that business reopening has had a positive impact. Now RBI’sGovernor is projecting a contraction of 7.5% for FY 2021 against previous estimates of acontraction of 9.5%.

The construction sector has sprung back from the first quarter’s debacle of 50.3% to a contraction of 8.6%. The laggard sectors continue to be hospitality, transport, trade, among others.

On an aggregate basis, 50% of the net profits of corporate India are being delivered by just 50 companies.

An analysis by BusinessLine shows that aggregate revenues for 3,827 non-financial listed companies declined by 7% this quarter compared to a 34% contraction in April-June. Operating profit margins expanded by four percentage points and net profits of these companies grew 31% in Q2, after an 80% decline in lockdown disrupted Q1 FY21.

Surprise, surprise? As lockdown began, corporate India spun into action, and on the back of benign input costs, managed savings in travel and overheads and cut advertising expenses. As interest rates cut many companies even resorted to cutting debt. Companies took advantage of the new tax regime and saw a lower outgo. Here is what contributed to the bottomline buoyancy:

a. Recoveries in sectors like pharmaceuticals, chemicals, financials, IT and cement.
b. Lower operating expenses
c. Lower raw material rates
d. Tax rate reduction offered in September last year.
e. Lower interest rates
f. Renegotiation of rental rates
g. Retrenchment and salary cuts

Just scratching beneath the surface, we find that the quarter’s profits harvest (YoY) was reaped by:

  • Building materials with 54.8% improvement where cement has contributed an improvement of 68.38% (Ultratech has jumped by 89.1%, Ambuja Cement by 87.77%, Shree Cement 77.06% Ramco Cement by 40.19% contributing to the larger absolute rise in net profits) where cement saved costs by moving material by rakes rather than by road. The Ceramics, Stone and Sanitaryware sector contributed 20.7% with Somany, HSIL, Asian Granito contributing the most. Glass, Laminates, Wood products have all suffered.
  • Infrastructure sector contributed by construction infrastructure profit makers like L&T ( a 238% jump) IRB Infra, Ashoka Buildcon, MBL Infra, Adani Ports. But most other construction contracting companies struggled to get back on their feet.
  • Real estate sector has been badly hit too with almost all showing declines over previous year same quarter
  • Many of the ‘lockdown’ benefits will get withdrawn like moratorium, salary cuts will get restored, operations will require rehiring, building material rates have shot up, festivities will be over, and so going forward the road to profitability will not drive through any further cost cutting measures but acceleration of growth.

    Demand needs to come back. Private consumption which is the driver of the economy (accounting for 58% of the GDP) witnessed a contraction in growth of (-) 11.32% in growth rates in Q2 FY21 from year ago (6.4%). As per Care Ratings, on the capex side, the expenditure by the Central Government was relatively slower with 40% of the budgeted amount being spent compared with 55% last year. For revenue expenditure it was also slightly lower at 50% compared with 53% last year. Hence there has been prioritization in expenditures across ministries to keep overall expenditure under check considering that the revenue flows have been much lower on account of the lockdown which affected tax collections quite sharply. Significant cut down in spending has also been seen in the Ministry of Roads, Transport & Highways which spent only 50% of the budgeted expenditure until September 30 against last year’s 62%. On the revenue side out of the Rs 22.46 trillion of non-debt revenue, only 25% has been garnered as against 40% last year during the first 6 months. The shortfall of 15% is around Rs 3.36 trillion. Last year too there was not much movement on disinvestment and that would be another challenge in the next 5 months. While GST collections have been good in October, a lot depends on the sustainability of the same.

    Author: Pratap Padode is Editor-in-Chief, Construction World, & Founder, FIRST ConstructionCouncil.

    Also read: Why India’s GDP is leaking!

    Also read: We are in the final stages of mining reforms: Pralhad Joshi


    Your next big infra connection is waiting at RAHSTA 2025 – Asia’s Biggest Roads & Highways Expo, Jio World Convention Centre, Mumbai. Don’t miss out!

    Will profits growth of over 30% in Q2 sustain? Large companies are cornering bigger market shares. Their turnovers are rising at the cost of other declining turnovers of smaller and medium-sized firms. Consolidation is likely as either the companies will sell out or clients will agree to pay a higher price and reach out to the bigger brand and more trusted company in virtually every sector. The economy has shrunk by 7.5% in the second quarter against a 23.9% contraction in the first quarter, signalling that business reopening has had a positive impact. Now RBI’sGovernor is projecting a contraction of 7.5% for FY 2021 against previous estimates of acontraction of 9.5%. The construction sector has sprung back from the first quarter’s debacle of 50.3% to a contraction of 8.6%. The laggard sectors continue to be hospitality, transport, trade, among others. On an aggregate basis, 50% of the net profits of corporate India are being delivered by just 50 companies. An analysis by BusinessLine shows that aggregate revenues for 3,827 non-financial listed companies declined by 7% this quarter compared to a 34% contraction in April-June. Operating profit margins expanded by four percentage points and net profits of these companies grew 31% in Q2, after an 80% decline in lockdown disrupted Q1 FY21. Surprise, surprise? As lockdown began, corporate India spun into action, and on the back of benign input costs, managed savings in travel and overheads and cut advertising expenses. As interest rates cut many companies even resorted to cutting debt. Companies took advantage of the new tax regime and saw a lower outgo. Here is what contributed to the bottomline buoyancy: a. Recoveries in sectors like pharmaceuticals, chemicals, financials, IT and cement. b. Lower operating expenses c. Lower raw material rates d. Tax rate reduction offered in September last year. e. Lower interest rates f. Renegotiation of rental rates g. Retrenchment and salary cuts Just scratching beneath the surface, we find that the quarter’s profits harvest (YoY) was reaped by: Building materials with 54.8% improvement where cement has contributed an improvement of 68.38% (Ultratech has jumped by 89.1%, Ambuja Cement by 87.77%, Shree Cement 77.06% Ramco Cement by 40.19% contributing to the larger absolute rise in net profits) where cement saved costs by moving material by rakes rather than by road. The Ceramics, Stone and Sanitaryware sector contributed 20.7% with Somany, HSIL, Asian Granito contributing the most. Glass, Laminates, Wood products have all suffered. Infrastructure sector contributed by construction infrastructure profit makers like L&T ( a 238% jump) IRB Infra, Ashoka Buildcon, MBL Infra, Adani Ports. But most other construction contracting companies struggled to get back on their feet. Real estate sector has been badly hit too with almost all showing declines over previous year same quarter Many of the ‘lockdown’ benefits will get withdrawn like moratorium, salary cuts will get restored, operations will require rehiring, building material rates have shot up, festivities will be over, and so going forward the road to profitability will not drive through any further cost cutting measures but acceleration of growth. Demand needs to come back. Private consumption which is the driver of the economy (accounting for 58% of the GDP) witnessed a contraction in growth of (-) 11.32% in growth rates in Q2 FY21 from year ago (6.4%). As per Care Ratings, on the capex side, the expenditure by the Central Government was relatively slower with 40% of the budgeted amount being spent compared with 55% last year. For revenue expenditure it was also slightly lower at 50% compared with 53% last year. Hence there has been prioritization in expenditures across ministries to keep overall expenditure under check considering that the revenue flows have been much lower on account of the lockdown which affected tax collections quite sharply. Significant cut down in spending has also been seen in the Ministry of Roads, Transport & Highways which spent only 50% of the budgeted expenditure until September 30 against last year’s 62%. On the revenue side out of the Rs 22.46 trillion of non-debt revenue, only 25% has been garnered as against 40% last year during the first 6 months. The shortfall of 15% is around Rs 3.36 trillion. Last year too there was not much movement on disinvestment and that would be another challenge in the next 5 months. While GST collections have been good in October, a lot depends on the sustainability of the same. Author: Pratap Padode is Editor-in-Chief, Construction World, & Founder, FIRST ConstructionCouncil. Also read: Why India’s GDP is leaking! Also read: We are in the final stages of mining reforms: Pralhad Joshi

    Next Story
    Real Estate

    Mumbai Records 11,230 Property Deals in August 2025

    Mumbai’s property market remained resilient in August 2025, with 11,230 property registrations recorded under the Brihanmumbai Municipal Corporation (BMC) jurisdiction, according to data released by Knight Frank India. While this marks a 3 per cent year-on-year (YoY) decline compared to 11,631 registrations in August 2024, activity stayed robust despite the marginal dip.On a month-on-month (MoM) basis, registrations fell 11 per cent from 12,579 deals in July 2025, indicating seasonal moderation. However, the city’s stamp duty collections still reached Rs 10 billion, reflecting a 6 per cent..

    Next Story
    Infrastructure Transport

    68 Jammu-Katra Trains Cancelled Amid Rain Damage

    Jammu and Katra railway services remain severely affected as Northern Railway announced the cancellation of 68 trains—both incoming and outgoing—until 30 September, due to extensive track damage caused by heavy rains and flash floods. Meanwhile, 24 trains are scheduled to resume operations gradually.The Jammu railway division has experienced a complete halt in services for the past eight days, following track misalignment and breaches at several points along the Pathankot–Jammu section. Torrential rainfall since 26 August led to widespread flooding and damage, stranding hundreds of passe..

    Next Story
    Infrastructure Transport

    Bangalore Metro MD Reviews Reach 6 and Phase 2A Progress

    Bangalore Metro Rail Corporation Limited (BMRCL) Managing Director, Dr J Ravishankar, IAS, conducted inspections of key metro corridors on 29 and 30 August, reviewing the progress of Reach 6 (Pink Line) and Phase 2A (Blue Line).On 30 August, the inspection covered Reach 6, a 21.39-km corridor stretching from Kalena Agrahara to Nagawara, with 18 stations. This stretch is part of Phase 2 of the Bangalore Metro project. Dr Ravishankar assessed the status of civil works, finishing, track laying, and system integration between Kalena Agrahara and MG Road.Earlier, on 29 August, the MD inspected Phas..

    Advertisement

    Subscribe to Our Newsletter

    Get daily newsletters around different themes from Construction world.

    STAY CONNECTED

    Advertisement

    Advertisement

    Advertisement

    Talk to us?