The Reserve Bank of India has released data on the performance of the non-financial private corporate business sector during the third quarter of 2015-16 (October–December 2015).
The data compiled is based on the abridged financial results of 2,736 listed non-government non-financial companies. To enable comparison, similar data pertaining to Q3:2014-15 and Q2:2015-16 were also presented. The RBI says “Coverage of companies in different quarters varies to some extent, depending on the date of declaration of quarterly results; however, it is not expected to alter the aggregate position significantly”.
The data on ‘Sales’ revealed that contraction in sales continued in Q3:2015-16 for the aggregate level and manufacturing sector, primarily driven by the contraction in ‘Petroleum Products’ and ‘Iron & Steel’ industry. Y-o-Y sales growth of the IT sector and services (other than IT) sector moderated in Q3:2015-16.
On the ‘Corporate expenditure’ front, at the aggregate level, expenses in raw material continued to contract The Y-o-Y growth rate of staff costs increased for the IT sector and the services (other than IT) sector. Cost of raw materials to sales ratio declined at the aggregate level and in the manufacturing sector..
On corporate ‘Operating Profits’, at the aggregate level, operating profit, which was stagnant in Q3:2014-15 grew by 9.0 per cent in Q3:2015-16. Operating profit growth for the manufacturing sector improved to 11.7 per cent in Q3:2015-16 from a contraction of 3.1 per cent in Q3:2014-15. It decelerated slightly for the Services (Non-IT) sector and sharply for the IT sector.
As regards Interest for corporates, the Y-o-Y growth in ‘Interest Expenses’ declined significantly in Q3:2015-16 at the aggregate level and across all sectors. The Debt servicing capacity as measured by interest coverage ratio (Earnings before Interest and Tax/Interest expenses) declined in Q3:2015-16 as compared with the previous quarter. However, it showed marginal improvement as compared with Q3:2014-15 at the aggregate level and in the manufacturing sector.
On ‘Net Profits’, the data reveals that Net Profit grew by 15.9 per cent in Q3:2015-16 as against 9.9 per cent in the previous quarter. Among the sectors, net profit showed a significant improvement for the manufacturing sector, contracted for the services (Non- IT) sector and decelerated sharply for the IT sector (Table 2A).
Finally, as regards pricing power, the ‘Pricing Power’ as measured by operating profit margin decreased in Q3:2015-16 from the levels observed in the previous quarter for the aggregate level, the manufacturing and IT sectors. However, it remained higher than the levels observed in Q3:2014-15 for the aggregate level, manufacturing and services (Non – IT) sectors.