Though the Indian economy is recovering slowly, the consolidated profit performance of corporate India is not in a good shape. The last three-year period spanning from 2006-2007 to 2008-09 was a difficult phase in the Indian economy. All the key industries of the economy namely construction, cement, steel, automobiles, textiles and tyres witnessed negative growth in their consolidated bottomline during 2008-09. Though the topline growth was positive during the period, 2008-09 and the second quarter of 2009-10 was tough for corporates of the country.
The sub-prime crisis in the US engulfed the biggies of Wall-Street leading to a severe liquidity crisis across the world. Most of the industries are facing the brunt of liquidity crunch with delayed expansion, overseas acquisition, higher interest costs, lower sales and profitability. Export dependent industries like textiles, gems and jewellery have been severely hit. Construction, cement, steel and automobiles have shown a dismal performance during 2008-09 and the second quarter of 2009-10.
Says Kishore P ostwal, CMD, CNI Research, “In July-September 2008, commodity prices were ruling very high and most companies were sitting on comfortable inventories. In October 2008, the global market crashed and commodity prices fell vertically. This impacted the bottomline for two quarters—October-December ‘08 and January-March ’09. The market stabilised during the March quarter and fresh inventories were built up in that quarter at lower prices. As a result the April-June’09 quarter was better than expected even though the economy did not recover. This had some impact in the July-September ’09 quarter. The result was that the bottomline was down.”
An analysis of 670 companies shows that they posted 20.3% decline in their aggregate net profit to Rs 1.66 lakh crore in 2008-09 after reaching positive growth of 31.8% during 2007-08. The findings are from a study of three years’ consolidated data (2006-07 to 2008-09) available with FE Research Bureau
Their net sales growth was 20.7% in 2008-09, which is lower than the growth of 30.8% in 2007-08. Though 2008-09 was not good for corporates in terms of sales and net profit growth, but some industries like engineering, entertainment, fertilisers, personal care, sugar and electronics showed higher growth in net profit during 2008-09 as compared to the year 2007-08.
Though the consolidated sales growth of Corporate India was positive in 2008-09 and 2007-08, the second quarterly sales growth of 348 companies was negative at 9.9% during July-September 2009 from the level of July-September 2008.