September 7, 2021 3:00:50 am
Aided by a decline in Covid cases and unlocking of restrictions, sales and net profit of listed non-financial, non-government companies have reported a significant jump for the quarter ended June 30, 2021.
According to an RBI analysis, 2,610 companies posted a 60.6 per cent rise in sales to Rs 9.87 lakh crore in June 2021 as against Rs 6.11 lakh crore. This rise was aided by low base in the June quarter of 2020 as Covid pandemic forced companies to shut down operations and sales plummeted.
Net profits of these companies skyrocketed to Rs 90,325 crore for June 2021 as against a loss of Rs 2,646 crore in the same period of last year. Interest cost of these corporates declined by 8.6 per cent to Rs 35,744 crore from Rs 38,527 crore a year ago. Staff costs soared by 15.6 per cent to Rs 1.17 lakh crore in June 2021 from Rs 1.01 lakh crore.
With companies resuming operations, raw material costs soared by 109.1 per cent to Rs 4.04 lakh crore in June this year from Rs 1.89 lakh crore a year ago, according to the RBI study.
Meanwhile, sales of 1,647 manufacturing companies recorded extraordinarily high growth (y-o-y) of 75.0 per cent in Q1:2021-22, which was aided by very low base 41.1 per cent decline in Q1 of 2020-21, reflecting the Covid pandemic impact on operations. All the major sectors recorded high growth during the quarter, it said.
Sales growth of information technology (IT) sector companies, which remained in positive terrain throughout the pandemic, accelerated to 17.5 per cent in Q1 of 2021-22 from 6.4 per cent in the previous quarter. Sales of non-IT services companies also surged (y-o-y) in June quarter of 2021-22, but the revenues of telecom companies within this group declined, the RBI study said.
It said manufacturing companies increased their expenditure on raw materials during Q1 of 2021-22 in tandem with the rise in sales. Staff cost growth (y-o-y) accelerated for all sectors during Q1 of 2021-22. Operating profits of manufacturing as well as services sector companies (both IT and non-IT) recorded high growth in the June quarter of 2021-22 in line with the rise in sales. Interest coverage ratio (ICR) of manufacturing companies remained steady at 7.5 in Q1:2021-22 (7.3 in the previous quarter). The ICR of non-IT services firms remained below unity.
Operating profit margin remained stable for manufacturing and IT companies during the quarter, but it moderated for the non-IT services companies, it said.
Meanwhile, one of the fallouts of the pandemic was the phenomenon of deleveraging in the corporate sector. This was not really surprising as investment activity slowed down and the future was laden with uncertainty. A sample of 691 companies show a sharper fall in outstanding debt.
“Overall, the debt for the 691 companies increased from Rs 9.47 lakh crore in FY17 to Rs 11.50 lakh crore in FY21. However, in this period it had declined in FY18 to Rs 9.37lakh crore and once again in FY21 from Rs 12.81 lakh crore in FY20. In FY19 debt was Rs 10.41 lakh crore,” Care Ratings said in a report.
In the last 5 years ending FY21, growth in total outstanding debt was CAGR of 9.2 per cent for the larger sample which comes down to 5 per cent for the sample excluding finance companies, it said. Clearly the tendency to deleverage is not just a pandemic situation but a policy that has been followed post the AQR process when banks came under pressure due to the ballooning of the non-performing assets.
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