Investors are in for a surprise when the September quarter results are declared. This will be the first earnings season post-goods and services tax (GST) and differences in how sales will be recorded now are likely to distort reported growth figures. Companies have cautioned about this in their analyst meets and conference calls. Some may provide some comparison to help investors figure out underlying growth but others may not. In the absence of a mandatory requirement to disclose, investors may be left holding numbers that are not comparable.
Nestlé India Ltd told investors in its recent analyst meet that reported sales growth will be slower by 5.25 percentage points, and at the product category level the impact could be between 1.5 and 2.5 percentage points. Earlier, Hindustan Unilever Ltd (HUL) had alerted investors that its reported sales could be lower by 7.5 percentage points post-GST. Dabur India Ltd’s management too had mentioned that its reported sales will shrink by about 6% due to the shift to GST. The examples mentioned are of consumer goods firms but this applies to all companies who pay GST.