'Other Income' saves day for India Inc profit story

It may be dismissed as a sundry item on company balance sheets, but it is the so-called 'other income' that seems to have saved the day for the top corporates of the country during the last fiscal.

As per an analysis of the full-year results announced by the top companies for the fiscal 2011-12 so far, they have managed to post a modest profit growth - mostly due to increased interest and other costs - as they have managed relatively robust revenue growth.

However, the growth has been much stronger for the companies in case of the 'other income', which mostly comprises earnings from fixed deposits, mutual funds and other investments, as also their various non-core businesses.

Out of the 30 companies constituting the stock market barometer Sensex, a total of 12 firms have so far announced their financial results for 2011-12 and their collective net profit grew by 9.2 per cent to over Rs 72,000 crore.

These companies include giants like Mukesh Ambani-led Reliance Industries, Tata group's TCS, other two IT majors Infosys and Wipro, private sector banking giants ICICI Bank and HDFC Bank, and telecom giant Bharti Airtel.

However, if we exclude the 'other income' from their financials, the total net profit actually fell by about 8 per cent to about Rs 43,000 crore during the year 2011-12.

The collective 'other income' of these 12 companies grew by more than 50 per cent during the year to about Rs 29,000 crore. In comparison, the growth in their total annual income was much muted at about 27 per cent to Rs 6,76,000 crore.

The profit growth was even more sluggish at about 9 per cent because of significant rise in expenses, including a surge of about 48 per cent in interest costs to Rs 44,000 crore. Their tax expenses also rose by over 25 per cent to about Rs 21,000 crore.

The analysis shows that the share of 'other income' has risen sharply in these 12 companies' net profit as well as total income.

Their collective 'other income' accounted for over 40 per cent of their net profit and over four percent of total income - up from about 30 per cent and 3.5 per cent, respectively, during the previous fiscal 2010-11.

Individually, the 'other income' component in the overall annual results rose sharply for companies like RIL (from Rs 3,052 crore in 2010-11 to Rs 6,192 crore in 2011-12), TCS (from Rs 494 crore to Rs 2685 crore), Sterlite (from Rs 1609 crore to Rs 2248 crore), Infosys (from Rs 1,147 crore to Rs 1,829 crore) and Bharti Airtel (from 113 crore to Rs 625 crore).

None of these 12 companies saw their 'other income' declining during the fiscal 2011-12, even as the net profit declined for a few and rose very modestly for many of them.

In some cases, the 'other income' was bigger than even the net profit of the company. Most of the companies have not given the details of their

'other income' earned during the year, as a detailed break-up of these components are generally disclosed in their annual reports sent to the shareholders and regulators.

Among those having provided some insight into the other income, Infosys said that its total 'other income' of Rs 1,829 crore during 2011-12 included Rs 1,696 crore from interest on deposits with banks and others, Rs 24 crore as dividend on investments in liquid mutual funds, miscellaneous income of Rs 28 crore and Rs 81 crore as exchange rate differences.

RIL said that its other income rose to Rs 6,192 crore, from Rs 3,052 crore on a year-on-year basis, primarily due to higher average liquid investments following the sale of participatory interest in the domestic oil and gas business to British energy giant BP.

TCS, on the other hand, said that its 'other income' during 2011-12 included foreign exchange loss of Rs 426.02 crore, as against a loss of Rs 36.23 crore in previous year.

HDFC Bank said that its 'other income' during the year were related to "income from non-fund based banking activities including commission, fees, foreign exchange earnings, earnings from derivative transactions and profit and loss (including revaluation) from investments."