India Inc Q4 profit weakest: ASSOCHAM

Last Updated: Fri, Apr 19, 2013 08:01 hrs

New Delhi, Apr 19 (IBNS) India's GDP growth in Q3 of 2012-13, at 4.5 per cent, was the weakest in the last 15 quarters, according to a latest analysis by a top industry body.

What is worrisome is that services sector growth, hitherto the mainstay of overall growth, has also decelerated to its slowest pace in a decade. Along with the deceleration of overall economic growth, financial performance of industry also witnessed deceleration, said a just concluded analysis by apex industry body ASSOCHAM.

Amidst slow growth in net sales, corporate India has shown downfall in terms of net profit margin in the fourth quarter of the financial year 2012-13. "The decline in growth rate of sales could be attributed to the low industrial production numbers with slack demand conditions in the economy," said Rajkumar Dhoot, president of The Associated Chambers of Commerce and Industry of India (ASSOCHAM) while releasing the chamber's analysis.

IIP growth in January 2013 was 2.4 per cent and February 0.6 per cent. Growth in the core industries, which account for 37.9% of IIP, witnessed a slower growth of 3.15 % in January 2013 and February 2013 it was -2.5 per cent.

The financial performance of 45 industry players in Q4 2012-13 indicated that their aggregate net sales declined by 2.9 per cent. While in the previous quarter of the same year, net sales have grown by 7.9 per cent on quarter on quarter basis. "This reveals suboptimal scale of operations in Indian Industry," said the ASSOCHAM chief.

On the other hand the aggregate expenditure of the sampled firms witnessed negative growth rate of 2.5 per cent in the fourth quarter whereas expenditure witnessed positive growth rate of 3.7 per cent in the previous quarter of same year 2012-13. It indicates the cost cutting measures that the industries in general are resorting to in this difficult period.

However, despite decline in the net sales aided by reduced expenditures, there is increase in total profits to the extent of 6.1 per cent. Although there has been an increase in profits but in comparison to the previous quarter, there has been a decline in their rate, highlighted the ASSOCHAM analysis.

As regards the manufacturing sector, despite witnessing challenging business conditions throughout the year, their sales have registered a negative growth of 10.3 per cent in the fourth quarter of the current financial year in contrast to 3.9 per cent in the previous quarter, but the profits of the sector have increased marginally by 1.6 per cent due to a fall in the total expenses.

There has been an increase in sales, expenses and profits of the I.T sector in the current quarter. The sales of the sector increased by 16.8 per cent, whereas the expenses increased by 27.4 per cent and profits increased by 8.2 per cent. The sales and expenses of the I.T sector have more or less been the same in contrast to the last quarter, but there is a decline seen in the total profits.

The Banking and Services sector has shown an increase in sales by 5.2 per cent, expenses b 6.4 per cent and profits by 8.2 per cent. Although the sector has shown growth in all parameters but in contrast to the previous quarter, sales and profits have declined but expenses have increased.

The Finance/Investments sector has shown a rapid downfall in the expenses and an increase in the sales thereby enhancing the profit margins. The profits of the sector have tremendously increased and the sector has shown outstanding performance.

"Corporate performance trends on the whole show that sectoral growth experiences are mixed. While, some sectors have outperformed & some have underperformed in the quarter ending March 2013," said Dhoot. "The increasing amounts of profits mirror bright performance of the management, but the decline in sales and expenditure further dampens the macroeconomic growth process of the economy."

"Most of the sectors of the economy have witnessed a downfall in the last quarter of FY12-13, although a few sectors have registered a positive growth rate, still industrial performance is a matter of concern for Indian economy," said the ASSOCHAM president.

"On the issue of growth bottoming out, no concrete evidence is seen and the revival mostly would remain a distant outcome."

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