InvestorQ : Is it true that the fourth quarter results for Indian companies could be disappointing compared to the second and third quarters?
prachi Patwardhan made post

Is it true that the fourth quarter results for Indian companies could be disappointing compared to the second and third quarters?

Answer
image
sara Kunju answered.
4 weeks ago
Follow

After two fantastic quarters in Jun-20 and Sep-20, experts are worrying that the corporate results in the fourth quarter could face pressure in terms of growth, profits and margins. Experts believe that the road ahead will be tougher in the Mar-21 quarter due to a plethora of factors. Major headwinds faced by Indian businesses include rising commodity costs, supply disruptions and concerns over sales momentum over likely resurgence of the virus.

The big challenge for Indian busines is the elevated prices of iron and steel and other base metals. This could easily put a sharp squeeze on the margins of user industries like construction, automobiles and heavy equipment. There is a fear that if such costs are passed on, it could hurt demand. Another worry is the rising cost of fuel, like petroleum coke and coal and these are important inputs for cement companies.

The last challenge is the capacity utilization or the plant load factor. Most of the factories are still operating at sub-par PLF capacity due to manpower shortages. That means, the fixed costs are still not being fully absorbed leading to likely pressure on margins. OPEC decision on oil supply will be a major overhang and oil prices do not show any signals of tapering. Overall, the challenges are many in Q4, so wait with fingers crossed.

2 Views