If Corporate India has done well on the profits front in 2002-2003, it is largely because of lower inventories.
Inventory levels dropped by Rs 3,632 crore in the year. In 2001-02, they rose by Rs 2,111 crore.
The drop suggests that, apart from better inventory management, companies worked on production management, producing only when there was demand.
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A recent study by banks also suggests that firms did not need working capital because they had stopped over-producing.
Backed by lower interest outgo, higher sales turnover and decline in closing stocks of finished goods, 735 companies on which information was available (excluding refinery and service companies) showed a 68 per cent jump in net profit in 2002-2003.
The study of the Business Standard Research Bureau is based on these 735 manufacturing firms, with sales turnover of over Rs 10 crore in the year ended March 2003.
The study excluded refineries because financial results of the major public sector ones were not available.
Service industries like infotech, trading, hotels, telecom, banks and non-banking finance companies have also been excluded because they are not engaged in manufacturing activities.
Of the 735 companies, the inventories of 408 declined, while those of 327 firms climbed. The closing stocks of the 408 firms saw a fall of Rs 5,872 crore in 2002-2003, against a rise of Rs 1,644 crore in 2001-2002. But those of the 327 firms increased by Rs 2,239 crore (Rs 466 crore in 2001-2002).
Reliance Industries, India