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Quarterly results: They're back, again! - Views on News from Equitymaster
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  • Jul 9, 2007

    Quarterly results: They're back, again!

    It starts all over again! We are talking about the quarterly result season, which just seemed to pass us by. It starts all over again, tomorrow, with a leading private sector bank taking the honours from a leading technology company, which has been the torchbearer for the quarterly result season for such a long time now.

    With the beginning of this round (or quarter) of results, we have already been witness to a slew of 'expectation round tables', which have been chewing on the fate of stock markets if the performance of India Inc. were to be worse than expected in the April to June 2007 quarter. With the effect of rising interest rates already showing in lower net profit levels of a host of mid and small cap companies (large ones have had enough cash inflows to weather the tide of rising interest costs), experts have it that the earnings growth of India Inc. might be slower than what has been recorded in the past eight or nine or ten quarters. The rising interest rates have also affected borrowings in the economy in the past quarter (credit growth slowed to 25% YoY as against 30+% over the past few quarters), citing fears of a slowdown in corporate capex.

    However, if the intentions of so many companies (both from the large and mid-tier spaces) are something to go by, the quest for growth does not stop here. Indian companies from across the sectors continue to expand their global footprint, either by way of joint ventures or acquisitions. The intention behind this global expansion is not only to add to the geographical and client base, but more importantly, also to secure access to technologies and best practices that these global corporations (the acquired companies) bring along with them.

    While the global endeavours have hurt profitability for some of these companies, most managements believe that this impact is expected to be medium term in nature and that their companies will get over on a strong growth momentum with the integration of the acquired companies into themselves.

    That's for the rising Indian MNCs! Coming back to the quarterly results, most of the companies would be announcing their first quarter numbers over the next few days. As such, basing your investments calls for the long term on the performance of these companies in this quarter might lead you to nowhere. Investing is a game played over the long term, and requires skills like precision (careful analysis of the potential investment) and discipline.

    Quarterly results are just as intervals in a film, only that there are four such intervals in a year! What happens in the first quarter might not tell you much about what will happen in the next one, and the next two. These shall just be considered as 'breaks' that allow you to take stock of your investments, which should ideally span over a minimum of 12 to 20 such intervals (3 to 5 years, to put it in simple words)!



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