FY16 was the year of Ashok Leyland, Tata Power and Eicher Motors, apart from oil companies. These were among the best performers in terms of profit growth among the BSE100 companies.
Leyland saw a 29 per cent rise in truck volumes. Tata Power's profits grew due to higher production at its Mundra (Gujarat) unit and higher profitability of its Delhi distribution business. Falling raw material prices also helped the winners of 2016 to make better profits.
Leyland reported a 700 per cent growth in net profit at Rs 1,070 crore, on revenue of Rs 20,499 crore. During the year, the company was consistently rewarded by the stock market, with a 48 per cent rise in market value (see chart). It sold 98,809 vehicles in FY16, from 66,442 in FY15, with growth in market share across India and segments. Monthly sales rose through the year.
“The closure of iron-ore mines in the financial year 2013 caused a significant decline in iron ore production, which led to decline in truck volumes. However, mining resumed in fiscal 2016, leading to an estimated production growth of 18 per cent. We expect ore production will continue to grow in the medium term and this should support truck volumes,” said a Deutsche Bank analyst on the outlook for the industry.
Tata Power was another surprise. It announced a 420 per cent jump in net profit to Rs 873 crore in FY16. Analysts said the March quarter was typically better for Tata Power’s Mundra plant, which achieved benchmark capacity of 80 per cent, to ensure full recovery of fixed charges. Falling global coal prices also helped the company to cut cost. The company also reduced its finance costs by six per cent.
The profits of the government-owned oil marketing companies (OMCs) — Hindustan Petroleum (HPC) , Indian Oil (IOC) and Bharat Petroleum (BPC) — were other winners. Their profits went up mainly due to the government fully reversing the subsidy burden they'd incurred, leading to a nil load in FY16. Analysts said HPC had modest inventory gains, while BPC made modest losses due to falling oil prices. The gross refinery margins of IOC was down by $3 a barrel due to crude oil inventory losses but even so, it reported a 128 per cent rise in profit. HPC’s were up 228 per cent.
Eicher Motors, among the top five profit making companies during the year, reported a 66 per cent rise in this, on a 43.5 per cent rise in revenue at Rs 15,428 crore. Strong volumes for Royal Enfield and rising margins helped. Siddhartha Lal, managing director, said Royal Enfield would invest Rs 600 crore towards product development this financial year and would set up two technical centres, in the UK and Chennai, to enhance manufacturing capacity and market development. In 2016-17, the company plans to make 675,000 motorcycles.