Despite good growth in their revenues, cement majors ACC and Ambuja Cements saw their March quarter profits dip sharply — by around 57 per cent and 23 per cent — on a year-on-year basis. This was primarily due to the change in deprecation policy made by the companies.

The two companies belonging to the Holcim Group shifted from the straight line method of depreciation being used earlier to the written down value method. This change resulted in ACC accounting for additional depreciation charge (including retrospective effect) of Rs 341 crore, while Ambuja Cements recognised additional depreciation of Rs 289 crore.

Besides this, higher operational costs also played a role in dragging down the companies' profits. But for the change in depreciation policy, ACC's profits would have grown by around 9 per cent year-on-year, while that of Ambuja Cements' would have increased by almost 25 per cent.

The stocks of ACC and Ambuja Cements were down around 4 per cent and 1 per cent respectively after the declaration of the results.

Oil and gas weakens Reliance

Market behemoth Reliance Industries had a mixed March quarter. Both its cyclical businesses — refining and petrochemicals — performed better than market expectations, and showed marginal improvement in profits compared to the December quarter. Improved product cracks propped up gross refining margin (GRM) from $6.8 a barrel in the December quarter to $7.6 a barrel.

Though margins in the petrochemicals business fell, better volumes on a sequential basis more than made up. But letting down the company once again was its oil and gas business. Gas output at the KG-D6 fields continued to decline, and the segment's profit fell by almost 27 per cent on a quarter-on-quarter basis.

Overall, the company's March quarter profit fell 4.6 per cent compared with the December quarter period. The buffer to the bottomline was again provided by ‘other income' which increased almost 34 per cent.

‘Other income' accounted for as much as 42 per cent of the company's profit before tax in the March quarter, as against 30 per cent in the December quarter and 14 per cent in the year-ago period. Market experts are increasingly concerned about the company's growing dependence on this ‘non-core' income.

On a year-on-year basis, Reliance Industries' March quarter profits fell by around 21 per cent, the sharpest drop in 3 years. Prior to its results of Friday, the RIL stock fell around 1.4 per cent.

Repo cut echoes through banking system

On Tuesday, the Reserve Bank of India cut the benchmark repo rate by a higher-than-expected 50 basis points. After 13 consecutive rate hikes over the past two years to combat rising inflation, this move by the central bank to give an impetus to growth was welcomed by the market. The Sensex rose more than 200 points on Tuesday.

Banking stocks also reacted positively on expectations of improved margins due to lower cost of borrowing, revival in credit off-take, and improvement in asset quality. But the RBI has also signalled against expecting further cuts soon, given that inflationary risks are still high.

The repo rate cut had a cascade effect over the week, with many banks cutting their deposit and lending rates. While customers can now expect lower rates on their home, auto or education loans, they should also be prepared to get less than before on their bank deposits.

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