Corporate earning indications from fourth-quarter advance tax payouts seem to be a mixed bag.
Financial services such as banking and insurance have emerged as clear winners, but engineering and construction companies have been impacted by the spillover of the global financial crisis into the real economy.
Those looking for the green shoots of recovery will be heartened by the growth in tax numbers from the FMCG and pharma sectors, which shows the countrys economic engine could be fuelled by domestic demand.
India's advance tax collections improved as compared to previous years
Indias advance tax collections till March 15, the last date for the payout, stood at Rs 2.82 lakh crore.
While this is way below the budgeted Rs 3.95 lakh crore for FY09, the income tax department hopes the figure would approximate the previous fiscals Rs 3.2 lakh crore by the end of this fiscal.
This is not so bad after all, feel experts, given the significant slowdown in growth momentum from the second half of 2008.
It might not be easy to gauge corporate earnings this fiscal from advance tax numbers alone, said A Balasubramaniam, CIO, Birla Sun Life Fund.
Positive trend for FY09 pertaining to advance tax
Fiscal and monetary stimulus packages put in place by the government, and robust demand from rural areas have helped sectors such as banking, pharma and FMCG, which will register growth in margins despite the general slowdown.
Growth in these areas will, to a certain extent, lift the slowdown in engineering, capital goods, cement and metals.
Advance tax numbers should be seen from the standpoint of the entire fiscal and not just on a quarterly basis, said Sudhir Kapadia, tax partner, Ernst & Young. Despite the onset of the global financial crisis, collections in the first half showed a lag effect of positive growth from the previous year.
We will have to wait and see the sum of the past two quarters. Overall, I think there will be a positive trend for the whole year (FY09).
Banks have more tax outgo as compared for Jan-March
Advance tax figures for the January-March quarter of FY09 compared with the same quarter last year show most banks have more tax outgo during this quarter than the corresponding quarter last year.
State Bank of India, the largest tax payer in the country, registered a 41% growth in tax outgo at Rs 5,733 crore for the current fiscal. The bank paid Rs 1,810 crore in the fourth quarter, 27% higher than the corresponding quarter last year.
Insurance major Life Insurance Corporation of India paid Rs 810 crore in the current quarter against Rs 657 crore a year ago. For the entire fiscal, it has paid Rs 2,988 crore against Rs 2,618 crore in FY08.
Citibanks tax outgo this quarter went up to Rs 1,010, while the corresponding figure last year was Rs 657 crore.