Corporate sales to grow 21.6%, profits to dip 7% in FY12: CMIE

Corporate India's sales are likely to grow by 21.6 per cent but profits are expected to fall by 7.2 per cent in FY 12, Centre for Monitoring Indian Economy (CMIE) has said.

Profits had fallen by 13.2 per cent in the first half of 2011-12 due to steep rise in raw material and fuel prices, high interest rates and delay in payment of cash subsidy to the oil marketing companies (OMCs) by the Government. A sharp depreciation in rupee since September 2011 brought mark-to- market (MTM) losses to firm which further pulled down profits, the city-based think-tank said in its monthly review.

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While high input costs and interest rate continue to haunt Indian companies, the Ministry of Corporate Affairs (MCA) has provided them some relief by allowing capitalisation of MTM losses on long-term loans taken for acquisition of fixed asset till March 2020.

This exemption was earlier available only till March 2012 and only to companies which had opted for it in 2008-09.

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In spite of this, corporate India is expected to report substantial amount of forex losses in the December 2011 quarter. This is because major chunk of the forex liabilities of corporate India are short-term, CMIE noted.

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"We expect corporate profits to fall by 9.1 per cent in the December 2011 quarter."

Corporate profits are expected to rise by 9.9 per cent in the March 2012 quarter mainly driven by a robust 40.2 per cent rise in net profits of the banking industry due to lower provisions and low base, the research outfit stated.

However, CMIE expected India Inc to record a robust 21.6 per cent growth in sales in 2011-12, on top of an equally impressive growth of 20.3 per cent in FY 11. (MORE)