The top line is in trouble, but lower prices of inputs have helped companies salvage profitability. That's not helping their bottom lines though - net profits have slipped sharply. That's pretty much the trend coming through from the first lot of corporate results for the December 2008 quarter.

A clutch of 308 companies (excluding banks and financial services) turned in a sales growth of just under 15 per cent y-o-y, which is way below the 39 per cent y-o-y growth in the September 2008 quarter and 35 per cent y-o-y growth in the June 2008 quarter.

The culprit, of course, is the slowdown in the  economy and the high cost of money which have sapped confidence and consumers' purchasing power. The sharp correction in the prices of commodities has also hurt the business of metal producers.

Users of commodities though have had some respite, posting better than expected operating profit margins. The OPM for the same sample at 16.04 per cent was actually an improvement over 15.6 per cent in the September quarter. It was however worse than the 18.42 per cent registered in the June 2008 quarter. The Hero Honda management, for instance, conceded it had gained from lower cost of raw materials.

However, the improvement has not trickled down to the net profit level, possibly because firms have earned less 'other income' and paid out more on account of interest. In a tight money market, they had to borrow at fairly high rates of interest and would have utilised any cash surpluses they had to run the business. That's why the net profits have fallen a steep 16 per cent compared with just a 6.3 per cent fall in the September quarter and an increase of 15 per cent in the June 2008 quarter.

Of the results announced so far, the biggest disappointments have been United Spirits [Get Quote] - where profits sank 65 per cent, Zee TV - profits dropped 25 per cent - and Hindustan Zinc [Get Quote] - net revenues down 37 per cent.

Among the surprises have been Cipla, which earned higher licensing income, Bharti - higher wireless margins - and Bajaj Auto [Get Quote] - better operating margins. According to a Citigroup report, outside of the biggest companies, businesses are feeling the heat: 95 of the top 500 companies (including financials) have seen profits fall 6.5 per cent y-o-y and are flat q-o-q.