With demand coming back across markets, rural and urban, the September quarter saw corporate sales regain momentum. Larger players continued to take away market share from unorganised units. However, inflation in inputs weighed on profits keeping margins in check; some firms took price hikes and cut back on non-essential expenses to protect their margins. Management commentary is reassuring with most expecting demand to look up further in the months ahead. At UltraTech, for instance, the management is confident of strong demand recovery of about 6-8 per cent y-o-y in H2FY22, post the monsoons.
The quarter reflected a resurgence in demand across businesses, albeit on the subdued base of Q2FY21. Revenues at Jubilant Foodworks were up 39 per cent y-o-y while at TVS Motor, they rose 22 per cent y-o-y, led by a 16 per cent increase in the average sales price. Asian Paints reported a stand-alone revenue growth in decoratives of a smart 36 per cent y-o-y, on the back of a 34 per cent jump in volumes while JSW Steel posted an increase in consolidated sales of 71 per cent y-o-y, as steel prices stayed elevated.
Sales, which were up 35 per cent y-o-y, for a sample of 202 companies (excluding banks and financials), were driven by good realisations and price increases. It must be mentioned, though, that the sample is skewed by Reliance Industries whose sales were up 50 per cent y-o-y. Not all companies were able to pass on the rising input costs. At Havells, the price hikes did not match the sharp rise in prices of raw materials resulting in lower gross margins. At Hindustan Unilever, gross margins contracted 140 bps y-o-y while ebitda margins fell 45 bps y-o-y. The ratio of raw materials to sales was up 355 basis points, in the three months to September.