Net sales witnessed a substantial growth of 12.7% in Q1FY15 compared with a lower growth of 5.9% in the previous fiscal. This pickup in growth of sales is attributed to a significant increase in the industrial output indicating improving conditions in the economy. The index of industrial production showed a growth of 3.9% for the cumulative period Apr- June'14 against a diminishing growth of -1% in Apr-June'13.
Aggregate expenditure across companies was recorded at 11.5% in Q1FY15 as against a much lower growth of 4.2% in Q1FY14.
The growth in cost of raw material expenses which accounts for more than 50% of the total expenditure turned to be higher at 12.8% from a negative 2.6% recorded earlier. This could be partly attributed to the elevated inflation recorded at 5.7% during the first quarter of the current fiscal against 4.8% in the corresponding period of the last fiscal.
On the other hand, growth in salaries and wages moderated from 16.4% in Q1FY14 to 10% in Q1FY15. Companies have worked on containing employee cost.
Also, growth in interest expenses was seen at 11.5% lower than 17.3% recorded earlier. The growth in bank credit witnessed a decline from 2.7% in Q1FY14 to 2.1% in Q1FY15. Clearly, the lower growth in interest expense was on account of lower off take in credit.
Net profits registered a significant growth of 33.7% in Q1FY15 compared with 5.7% growth in Q1 FY14. Higher growth in sales relative to expenditure as well as low base effect helped to increase growth in net profit.
Net profit margin, defined by the net profit to net sales ratio also increased in Q1 FY15 at 10.1% over 8 .5% in Q1 FY14.
Interest cover, defined as the Profit before Interest and Tax (PBIT) to interest increased from 2.9 in Q1 last fiscal to 3.2 in Q1 of the current fiscal. This is a positive signal for the corporate sector. The interest cover multiple has been coming down over the years from 4.8 in FY10 to 3 in FY14. This was also the time when CARE's Modified Credit ratio (MCR) improved from 0.88 to 1.02.
Bank Gross NPA ratio has inched up marginally from 3.7% to 3.9%.
A study of the performance of 1,437 companies (including banks) showed that net sales increased by 12.7% in Q1 FY15 when compared with 5.9% in the previous year while net profit increased sharply by 25% compared with a growth of 4.5% in Q1 FY14. Accordingly, Net profit margin increased to 10.1% from 9.1% in Q1FY14. This appears to be largely in line with the pickup in industrial production that has been witnessed in the recent months where the industrial output registered a significant cumulative growth of 3.9% (Apr- June'14) over a negative growth of -1% (Apr-June'13) in the corresponding period of the previous fiscal.
Industry wise analysis
Industrial growth witnessed a turnaround in the first quarter of the current fiscal year. Hence, an industry wise performance covering 46 sectors has been evaluated here in terms of growth in output and profitability in the Q1FY15 compared with Q1FY14.
Growth in net sales was positive across almost all the sectors examined here barring tea/coffee, engineering, Automobiles-Trucks & LCVs and diamond jewellery, which registered a negative growth in sales. A robust growth in sales was witnessed in case of mining & minerals segment which is in line with the significant increase in output. The growth in production in the mining sector turned positive to 3.2% in Q1FY15 from -4.6% Q1FY14.
Growth in sales across other sectors as well when juxtaposed with output also portrayed a similar picture. For instance: output in automobiles- trucks & LCVs as indicated by motors, trailers and semi-trailers witnessed a decline by -6%. Growth in output in printing also slowdown by -5.2%. Output in Chemicals turned positive by 1%. Growth in production of cement also improved considerably to 9.5% from 3.4% earlier. Fertilizer production also picked up by 8.6% compared with 2.5% last fiscal.
Profit Margins improved for 26 industries (56% of the sector examined here)-some of which witnessed a significant improvement are Mining Minerals (-38.5% to 2.7%), Pharmaceuticals (6.9% to 28%), Dyes & pigments (6.3% to 14.3%), Telecom (7.8% to 15.7%), Steel & Iron (-0.4% to 3.8%), Glass (-2.1% to 1.7%), Wood & Wood Products (1.8% to 5.4%), IT (20.6% to 23.2%), Consumer Durables (4.3% to 5.6%),castings/ Forgings (4.3% to 5.6%),etc.
Profit margins moderated for 17 sectors. It included sectors such as Tea/ coffee (12.9% to 3.2%), hotels (5.3% to 2.9%), Metals (45.4% to 43.3%), Printing & stationary (12.3% to 10.9%), Abrasives (9% to 10.9%), Diamond jewellery (3.8% to 2.7%), Automobiles – 2& 3 wheelers (10.3% to 9.4%), Engineering (5.1% to 4.2%), etc.
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