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The Good, Bad and Ugly in September 2021 Results

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September 2021 quarterly earnings were not as bad as expected. Margin pressures were mitigated by strong revenue growth in the top 200 companies. 

Topline growth was not only due to a low base but also because of strong aggregate demand. This is expected to sustain even in the December ended quarter given the early high-frequency indicators – WPI, manufacturing and services PMI, GST collections, export and import data, etc.

In this post, we dwell upon the earnings performance of the Nifty 200 index. We have analysed the results of 191 companies which represent nearly 97% of the market capitalisation.


Energy, banks, NBFCs, and metal stocks led incremental profitability of the Nifty 200 index in September ended quarter, in absolute terms. Banks and NBFCs benefitted from a steady recovery in loan growth, recovery and upgrade in the asset quality of most private sector banks, higher commodity prices and volume growth aided the energy and metal sectors, and opening up of the economy boosted overall growth.

On the flip side, higher commodity prices impacted margins. EBITDA Margins of companies (ex-financials) slipped by 114 basis points.

The Good, Bad and Ugly in September 2021 Results

We are using Quarter on Quarter gains rather than year-on-year because September 2020 was a Covid-impacted quarter in a large way. Even Q1-2021 was impacted, but in lesser proportion. We use that as a base instead.

Key Insights

IT, chemical, and metal were the only sectors to report the fifth consecutive quarter of sequential revenue growth. The IT sector benefitted from stable deal wins while chemicals and metals grew on the back of higher prices and volumes. Despite higher revenue, higher raw material and other input cost items like power and freight impacted chemical sector profitability.

The consumer retail sector reported the highest QoQ revenue growth on account of the low base set by the 2nd wave of the pandemic. Even the sequential EBITDA growth reported by the sector was the highest.

The cement sector, however, despite Q1 being impacted by the second wave, reported a sequential decline as seasonal weakness led to muted demand. Profitability was also impacted owing to cost pressures. (Note however, that cement is a strong seasonal as people don’t order as much cement in the monsoon season)

Auto and auto ancillaries sector profitability improved the most sequentially, led by Bajaj Auto, M&M, and Hero Moto. Bajaj Auto’s profitability improved on higher other income and lower tax rate, while for M&M, the reason was only higher other income. Hero Moto’s bottom line was aided by higher sales volume.

Telecom was the only sector to report losses over the last eight quarters continuously. Over the last four quarters however, overall losses are attributable to Vodafone Idea only.

The logistics sector reported the highest sequential margin expansion. InterGlobe Aviation reported EBITDA profit as against a loss in the previous quarter.

Most banks and NBFCs reported a steady growth on the back of loan growth and a decline in NPA ratios due to higher recoveries/upgrades during the quarter.

The healthcare sector reported slower sequential growth because of lower sales of Covid products in domestic formulations due to a drastic decline in Covid cases in India. Price erosion in the US and disruption in China led to higher raw material prices which impacted the margins.




The Good

Along with improved execution and higher deliveries, balance sheet transformation aided financials. Hindustan Aeronautics turned to net cash from net debt, leading to a more than a 90% drop in interest cost. Lower debtors and inventories and higher customer advances on the back of maintenance orders and receipt of milestone payments nearly doubled its cash.

All-round improvement in demand across all projects, improving occupancy levels, and stable rent and property prices aided growth for Oberoi Realty.

All retail front stocks – Aditya Birla Fashion, Titan, Trent, Bata India, and Page Industries – benefit from the easing of restrictions and strong festive demand. Aditya Birla witnessed a sharp improvement in its margins on an improved share of retail and private labels, lower markdowns, and cost control measures.

BEL’s core plant in Bangalore was back to full-throttle, and customers accepted deliveries, leading to higher revenue. This, coupled with a better sales mix and operating leverage, led to margin expansion. The company also witnessed a major boost in cash flows on the back of debtor recoveries. The net working capital cycle saw a sharp reduction to 10 days from 100 days last year.

A strong recovery aided Indian Hotels’ financials in the leisure segment, recovery in business travel, uptick in weddings and corporate events, and greater consumer preference for trusted brands. The company witnessed the highest revenue in September as occupancies were back to pre-covid levels. The boost in margins was also on account of cost-saving measures and operating leverage.

IndiGo’s financials improved as more travellers chose to fly in the quarter. The company’s passenger revenue nearly doubled, also aided by sequentially higher ticket prices. Passenger load factor – capacity utilisation – improved to 71% from 59% in the previous quarter, while yields – average fare per passenger per kilometre – increased by 21%.

The Good, Bad and Ugly in September 2021 Results

The Bad

Bandhan Bank reported a massive loss during the quarter due to elevated provisions (4x jump QoQ). The bank accelerated provisions for its existing NPA accounts, restructured advances, and shored up its contingent provisioning buffer resulted in heavy losses. On the business front, AUM growth was weak while the deposits trend remained healthy. Asset quality challenges continued to widen further, led by elevated slippages, an increase in the restructured book, and SMA (Special Mention Account) overdue in the MFI (Micro-Finance Institution) portfolio, remaining higher.

Lupin’s weaker EBITDA was lower US business margins, higher travel and royalty expenses, and one-time restructuring costs for speciality businesses. Owing to this, the management lowered EBITDA margin guidance to 16% for H2FY22 from 17-18% previously. Net profit was also impacted by one-offs related to Glumetza litigation payment and settlement and Solosec IP impairment.

For energy stocks – Gujarat Gas and Adani Transmission – mainly the weaker performance was an increase in raw material prices. For Gujarat Gas, higher LNG prices impacted margins, while for Adani Transmission, it was higher power and fuel costs. Sequentially for Adani Transmission, there was a dip in power demand which led to lower revenue.

Pfizer reported a sequential drop in revenue due to a drop in sales of Covid-related products. Pfizer’s largest product – Becosules – sales were impacted as it was widely used as an immunity booster during the pandemic. Likewise, Eliquis (Apixaban), used to treat and prevent clots in Covid patients, also declined in September ended quarter. EBITDA and net profit drop were also on account of higher other expenses amid the normalisation of operations.

A sharp fall in covid related sales sequentially impacted Dr Lal Pathlabs. Covid related revenues dropped 77% sequentially.

Despite a rise in revenues of NMDC, its EBTIDA declined sharply owing to an increase in royalty expenses. Revenues increased owing to higher realisation aided by lower grade slippage, lower slime sales, and deferred lifting at the Donimalai mine. Overall costs increased by 58% compared to last quarter, led by a 37% rise in royalty expense.

For cement companies – UltraTech and Ambuja – the September ended quarter is seasonally weak (construction activity is lower due to rains). This, coupled with increased cost pressures – rising fuel cost – impacted the earnings.

Varun Beverages’ margins were impacted owing to higher plastic bottle and sugar prices and higher employee costs. Plastic bottle prices increased by 18%, while sugar prices by 2%. Plastic bottle prices increased due to rising crude prices, as plastic bottles are a derivative of crude. Sequentially employee costs increased by 10%.

The Good, Bad and Ugly in September 2021 Results

The Leveraged

Overall, the total debt – long and short term borrowing – of Nifty 200 companies, excluding financials, increased marginally to ₹ 24.9 lakh crore. In absolute terms, the rise in debt was because of telecom companies – Bharti Airtel and Vodafone Idea and Adani group companies – Adani Ports and Adani Enterprises.

The Good, Bad and Ugly in September 2021 Results

Final Thoughts

Overall, the earnings were in line with market expectations. The quarter highlighted two trends – improving the demand environment and the impact of rising input costs on operating margins. Management commentaries across the board suggest an improved demand environment during the festive season. Companies are also confident of taking price hikes to offset the impact of rising input prices. However, this will remain a concern for autos, building material, cement, chemicals, consumer durables, FMCG, and metal sectors.


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This article is for information only and should not be considered as a recommendation to buy or sell any stocks.

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