Mumbai, June 15 (PTI): The net profit margin of Indian companies declined to 7.3 per cent in 2013-14 against 10 per cent in fiscal 2010-11 as producers failed to pass on the increase in input costs to consumers because of weak demand, a ratings firm said in its report.
Sales growth declined further to below 10 per cent in fiscal 2014, while expenditure also mirrored the trend in sales growth, the report said.
“The increase in raw material cost coupled with the weakness in demand (lower sales) made it difficult for producers to pass on the incremental cost onto consumers, thereby putting pressure on their profits. Net profit margin witnessed a decline to 7.3 per cent in fiscal 2014 from 10 per cent in fiscal 2011,” Care Ratings said in its report.
Based on the financial performance of 1,642 companies, including the three public sector oil marketing firms, the larger sized firms performed better than the smaller sized firms during the year.
“The top 354 companies with sales above Rs 1,000 crore accounted for nearly 94 per cent of the total sales and dominated the overall performance of the sector,” it said.
Noting that the growth in sales picked up sharply in fiscal 2011 and fiscal 2012, which can be partly attributed to the high levels of inflation during the period, the report said the growth in sales during the period was aided by the overall healthy demand in the domestic economy.
Industrial growth was high at 8.2 per cent in fiscal 2011 but slowed down to 2.9 per cent in fiscal 2012, which moderated considerably in the subsequent years with fiscal 2014 recording a 0.11 per cent contraction, Care Ratings said.
In the last five years, India’s economic performance has been influenced by several global and domestic concerns with the last fiscal recording 4.7 per cent growth.
According to Care Ratings, total expenditure has mirrored a trend similar to that of sales in terms of growth rate over the last five years. Aggregate expenditure across the companies increased significantly in fiscal 2011 and fiscal 2012, while it moderated in the last two fiscals.
Sectors such as metals, mining, oil exploration, cigarettes, IT, BPO and finance recorded high-profit margins in the range of 20-42 per cent, while sectors such as sugar, iron and iron products, petrochemicals and hotels recorded losses in fiscal 2014, the report said.