High interest cost will hurt EPS

Mumbai : Besides construction and real estate, even consumer staples and telecom are likely to be substantially hit. The negative impact of an inflationary environment on corporate profitability is already a big worry for 2011-12. Importantly, after the interest rate rises by the Reserve Bank of India (RBI) in the recent past, there is a high probability of corporate India getting hit on profits.

For instance, according to a report published by Goldman Sachs, under a scenario (see table) based on higher crude oil prices, increased interest rates and lower GDP growth, the most impacted sectors in terms of a hit on 2011-12 earnings will be construction, cement and real estate, media and consumer staples. These are part of the brokerage’s own universe of covered companies.