Earnings of Nifty companies amid pandemic

Along with the entire world, India Inc too started its first quarter of FY21 amid COVID-19 pandemic, which led to severe disruption on both, the demand and supply side.

Now the earning season of the first quarter is on the verge of end and it's an open secret that many industries were hit badly due to the COVID-19 pandemic. Not only this, but the complete lockdown of nearly two months has also badly affected their financial performance.

Here, we have tried to analyse the financial performance of Nifty 50 companies. The financial data of Q1FY21 of around 37 out of 50 Nifty companies (excluding banks and NBFCs) have been taken for this analysis.

The aggregate net sales of all these 37 companies in Q1FY21 tumbled nearly 31 per cent to Rs 6,34,705.73 crore from its corresponding quarter of the previous year. Also, sales fell nearly 30 per cent from the preceding quarter.

During such an uncertainty, operating leverage plays against the company but it seems that many companies managed to rationalise their costs to some extent as the aggregate EBITDA of all these companies fell by nearly 24 per cent YoY to Rs 1,02,266.16 crore. However, after-tax profit plummeted nearly 68 per cent YoY to Rs 18,370.92 crore.

The auto industry, which was already going through the bumpy ride, was the most-affected industry from Nifty constituents as the net sales of Maruti, Eicher, Hero MotoCorp, Bajaj Auto and Tata Motors slipped nearly in the range of 48 to 80 per cent.

Though earnings have been deteriorated in the recent quarter, the hope of expected recovery in the future has helped the market to float and surge, which has resulted in expensive valuation for Nifty. As of August 17, 2020, Nifty was at 31.64x P/E, which is far ahead than its 12-year monthly median P/E of 22x.