June quarter results: Retail lenders spur consumer demand across industries

Revenue and profit growth rebounded across industries in the June 2018 quarter, thanks to the favourable base-effect and an uptick in consumer demand from a low base last financial year. Consumer demand had taken a beating in the first half of 2017 calendar year due to the twin effects of demonetisation and de-stocking prior to the roll-out of the goods and services tax, beginning July 1, 2017.

 

Private consumption-related sectors have done well during the quarter but discretionary spending (automobiles and consumer durable) had done better than non-discretionary spending such as personal care and packaged food products.

For example, the combined net sales of personal care, food and tobacco companies  were up 10.6 per cent year-on-year (y-o-y) during the quarter, compared to 20 per cent y-o-y growth reported by consumer durable makers and 27.2 per cent y-o-y growth in the top line of automobile makers. This excludes Tata Motors, which gets bulk of its revenue from its Jaguar Land Rover subsidiary. 

 

This is partly due to a boom in retail lending, led by non-banking finance companies such as Bajaj Finance, Capital First, Mahindra & Mahindra Financial and Bharat Financial Inclusion. The combined net interest income of non-bank retail lenders was up 22.7 per cent in the first quarter, while their combined earnings were up 27 per cent. These companies have been aggressively expanding their franchise to newer geographies and newer categories. As a result, an increasing number of big-ticket consumer goods are available on deferred payment, leading to a boom in their demand. Analysts expect the trend to continue for a while, given the low level of household indebtedness.

 

With inputs from Ram Prasad Sahu, Shreepad S Aute and Ujjval Jauhari

 

 

Note: PBIDT is profit before interest, depreciation and tax excludes other income; GNPA: Gross non-performing assets as percentage of total advances (actual per cent); CMP: Current market price as of Aug 14, 2018; all figures are y-o-y change in % for quarter ended June 2018; price change is year-to-date change; change in PBIDT are in basis points; LTP: Loss-to-profit; PTL: Profit-to-loss; compiled by BS Research Bureau

Source Capitaline